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STOCK MARKET WATCH -- Monday, 2 December 2013
[font size=3]STOCK MARKET WATCH, Monday, 2 December 2013[font color=black][/font]
SMW for 27 November 2013
AT THE CLOSING BELL ON 29 November 2013
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Dow Jones 16,086.41 -10.92 (-0.07%)
S&P 500 1,805.81 -1.42 (-0.08%)
[font color=green]Nasdaq 4,059.89 +15.14 (0.37%)
[font color=green]10 Year 2.74% -0.02 (-0.72%)
30 Year 3.81% -0.03 (-0.78%) [font color=black]
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[font size=2]Market Conditions During Trading Hours[/font]
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]
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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
Marketwatch Data
Bloomberg Economic News
Yahoo Finance
Google Finance
Bank Tracker
Credit Union Tracker
Daily Job Cuts
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
Financial Sense
Calculated Risk
Naked Capitalism
Credit Writedowns
Brad DeLong
Bonddad
Atrios
goldmansachs666
The Stand-Up Economist
The Automatic Earth
Wall Street on Parade
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[font color=black][font size=2]Handy Links - Essential Reading:[/font][/font]
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Matt Taibi: Secret and Lies of the Bailout
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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
Open Government
Earmark Database
USA spending.gov
[/center][font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
Charlie Rose talks with Krugman
William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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[font color=red]Partial List of Financial Sector Officials Convicted since 1/20/09 [/font][font color=red]
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
3/6/12 Allen Stanford, former Caribbean billionaire and general schmuck, convicted on 13 of 14 counts in $2.2B Ponzi scheme, faces 20+ years in prison
6/4/12 Matthew Kluger, lawyer, sentenced to 12 years in prison, along with co-conspirator stock trader Garrett Bauer (9 years) and co-conspirator Kenneth Robinson (not yet sentenced) for 17 year insider trading scheme.
6/14/12 Allen Stanford sentenced to 110 years without parole.
6/15/12 Rajat Gupta, former Goldman Sachs director, found guilty of insider trading. Could face a decade in prison when sentenced later this year.
6/22/12 Timothy S. Durham, 49, former CEO of Fair Financial Company, convicted of one count conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud.
6/22/12 James F. Cochran, 56, former chairman of the board of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and six counts of wire fraud.
6/22/12 Rick D. Snow, 48, former CFO of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and three counts of wire fraud.
7/13/12 Russell Wassendorf Sr., CEO of collapsed brokerage firm Peregrine Financial Group Inc. arrested and charged with lying to regulators after admitting to authorities he embezzled "millions of dollars" and forged bank statements for "nearly twenty years."
8/22/12 Doug Whitman, Whitman Capital LLC hedge fund founder, convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent
10/26/12 UPDATE: Former Goldman Sachs director Rajat Gupta sentenced to two years in federal prison. He will, of course, appeal. . .
11/20/12 Hedge fund manager Matthew Martoma charged with insider trading at SAC Capital Advisors, and prosecutors are looking at Martoma's boss, Steven Cohen, for possible involvement.
02/14/13 Gilbert Lopez, former chief accounting officer of Stanford Financial Group, and former controller Mark Kuhrt sentenced to 20 yrs in prison for their roles in Allen Sanford's $7.2 billion Ponzi scheme.
03/29/13 Michael Sternberg, portfolio mgr at SAC Capital, arrested in NYC, charged with conspiracy and securities fraud. Pled not guilty and freed on $3m bail.
04/04/13 Matthew Marshall Taylor,fmr Goldman Sachs trader arrested, charged by CFTC w/defrauding his employer on $8BN futures bet "by intentionally concealing the true huge size, as well as the risk and potential profits or losses associated."
04/04/13 Matthew Taylor admits guilt, makes plea bargain. Sentencing set for 26 June; faces up to 20 years in prison but will likely only see 3-4 years. Says, "I am truly sorry."
04/11/13 Ex-KPMG LLP partner Scott London charged by federal prosecutors w/passing inside tips to a friend in exchange for cash, jewelry, and concert tickets; expected to plead guilty in May.
08/01/13 Fabrice Tourré convicted on six counts of security fraud, including "aiding and abetting" his former employer, Goldman Sachs
08/14/13 Javier Martin-Artajo and Julien Grout charged with wire fraud, falsifying records, and conspiracy in connection with JP Morgan's "London Whale" trade.
08/19/13 Phillip A. Falcone, manager of hedge fund Harbinger Capital Partners, agrees to admit to "wrongdoing" in market manipulation. Will banned from securities industry for 5 years and pay $18MM in disgorgement and fines.
09/16/13 Javier Martin-Artajo and Julien Grout officially indicted on charges associated with "London Whale" trade.
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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red][font color=black]
31 replies
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= new reply since forum marked as read
http://opinionator.blogs.nytimes.com/2013/11/30/the-minimum-we-can-do/
...The idea of fairness has been at the heart of wage standards since their inception. This is evident in the very name of the legislation that established the minimum wage in 1938, the Fair Labor Standards Act. When Roosevelt sent the bill to Congress, he sent along a message declaring that America should be able to provide its working men and women “a fair day’s pay for a fair day’s work.” And he tapped into a popular sentiment years earlier when he declared, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” This type of concern for fairness actually runs deep in the human psyche. There is a widespread sense that it is unfair of employers to take advantage of workers who may have little recourse but to work at very low wages...Of course, if most minimum wage workers were middle-class teenagers, many of us might shrug off concerns about their wages, since they are taken care of in other ways. But in reality, the low-wage work force has become older and more educated over time. In 1979, among low-wage workers earning no more than $10 an hour (adjusted for inflation), 26 percent were teenagers between 16 and 19, and 25 percent had at least some college experience. By 2011, the teenage composition had fallen to 12 percent, while over 43 percent of low-wage workers had spent at least some time in college. Even among those earning no more than the federal minimum wage of $7.25 in 2011, less than a quarter were teenagers.
Support for increasing the minimum wage stretches across the political spectrum...over three-quarters of Americans, including a solid majority of Republicans, say they support raising the minimum wage to either $9 or $10.10 an hour. It is therefore not a surprise that when they have been given a choice, voters in red and blue states alike have consistently supported, by wide margins, initiatives to raise the minimum wage. In 2004, 71 percent of Florida voters opted to raise and inflation-index the minimum wage, which today stands at $7.79 per hour. That same year, 68 percent of Nevadans voted to raise and index their minimum wage, which is now $8.25 for employees without health benefits. Since 1998, 10 states have put minimum wage increases on the ballot; voters have approved them every time. But the popularity of minimum wages has not translated into legislative success on the federal level. Interest group pressure — especially from the restaurant lobby — has been one factor. Ironically, the very popularity of minimum wages may also have contributed to the failure to automatically index the minimum wage to inflation: Democratic legislators often prefer to increase the wage themselves since it allows them to win more political points. While 11 states currently index the minimum wage, only one, Vermont, did so legislatively; the rest were through ballot measures.
As a result of legislative inaction, inflation-adjusted minimum wages in the United States have declined in both absolute and relative terms for most of the past four decades. The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage. In other words, if we want to get the minimum wage back to 55 percent of the median full-time wage, we would need to raise it to $10.78 an hour.
International comparisons also show how out of line our current policy is: the United States has the third lowest minimum wage relative to the median of all Organization for Economic Cooperation and Development countries. This erosion of the minimum wage has been an important contributor to wage inequality, especially for women. While there is some disagreement about exact magnitudes, the evidence suggests that around half of the increase in inequality in the bottom half of the wage distribution since 1979 was a result of falling real minimum wages. And unlike inequality that stems from factors like technological change, this growth in inequality was clearly avoidable. All we had to do to prevent it was index the minimum wage to the cost of living.
SUPPORTING RESEARCH AT LINK
Arindrajit Dube is an associate professor of economics at the University of Massachusetts, Amherst, and a research fellow at IZA.
...The idea of fairness has been at the heart of wage standards since their inception. This is evident in the very name of the legislation that established the minimum wage in 1938, the Fair Labor Standards Act. When Roosevelt sent the bill to Congress, he sent along a message declaring that America should be able to provide its working men and women “a fair day’s pay for a fair day’s work.” And he tapped into a popular sentiment years earlier when he declared, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” This type of concern for fairness actually runs deep in the human psyche. There is a widespread sense that it is unfair of employers to take advantage of workers who may have little recourse but to work at very low wages...Of course, if most minimum wage workers were middle-class teenagers, many of us might shrug off concerns about their wages, since they are taken care of in other ways. But in reality, the low-wage work force has become older and more educated over time. In 1979, among low-wage workers earning no more than $10 an hour (adjusted for inflation), 26 percent were teenagers between 16 and 19, and 25 percent had at least some college experience. By 2011, the teenage composition had fallen to 12 percent, while over 43 percent of low-wage workers had spent at least some time in college. Even among those earning no more than the federal minimum wage of $7.25 in 2011, less than a quarter were teenagers.
Support for increasing the minimum wage stretches across the political spectrum...over three-quarters of Americans, including a solid majority of Republicans, say they support raising the minimum wage to either $9 or $10.10 an hour. It is therefore not a surprise that when they have been given a choice, voters in red and blue states alike have consistently supported, by wide margins, initiatives to raise the minimum wage. In 2004, 71 percent of Florida voters opted to raise and inflation-index the minimum wage, which today stands at $7.79 per hour. That same year, 68 percent of Nevadans voted to raise and index their minimum wage, which is now $8.25 for employees without health benefits. Since 1998, 10 states have put minimum wage increases on the ballot; voters have approved them every time. But the popularity of minimum wages has not translated into legislative success on the federal level. Interest group pressure — especially from the restaurant lobby — has been one factor. Ironically, the very popularity of minimum wages may also have contributed to the failure to automatically index the minimum wage to inflation: Democratic legislators often prefer to increase the wage themselves since it allows them to win more political points. While 11 states currently index the minimum wage, only one, Vermont, did so legislatively; the rest were through ballot measures.
As a result of legislative inaction, inflation-adjusted minimum wages in the United States have declined in both absolute and relative terms for most of the past four decades. The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage. In other words, if we want to get the minimum wage back to 55 percent of the median full-time wage, we would need to raise it to $10.78 an hour.
International comparisons also show how out of line our current policy is: the United States has the third lowest minimum wage relative to the median of all Organization for Economic Cooperation and Development countries. This erosion of the minimum wage has been an important contributor to wage inequality, especially for women. While there is some disagreement about exact magnitudes, the evidence suggests that around half of the increase in inequality in the bottom half of the wage distribution since 1979 was a result of falling real minimum wages. And unlike inequality that stems from factors like technological change, this growth in inequality was clearly avoidable. All we had to do to prevent it was index the minimum wage to the cost of living.
SUPPORTING RESEARCH AT LINK
Arindrajit Dube is an associate professor of economics at the University of Massachusetts, Amherst, and a research fellow at IZA.
http://www.nakedcapitalism.com/2013/11/governments-will-struggle-to-control-bitcoin.html
Yves here. I was extremely puzzled to see various US regulators make cautiously positive remarks about Bitcoin in Congressional hearings. One would expect them to be opposed. First, Bitcoin is a cash proxy without many of the inconveniences of cash, in particular, the fact that carrying lots of bills to complete large transactions can be conspicuous and inconvenient. That is terribly useful to tax evader and criminals. Second is that if it were to become terribly successful, it would compete with official currencies.
But I now have a guess as to what happened. The officialdom is prisoner of its ideology. Bitcoin is an innovation, ergo it must be good.
The hearings in the US senate last week were the most high profile public discussions that have taken place on the subject of virtual currencies. The US showed its openness by broadcasting the hearing, and it was watched by many Bitcoin enthusiasts around the world. The discussion looked at the potential risks and opportunities Bitcoin and other virtual currencies pose for society, without going into any of the technical details. Senators made analogies with previous technologies and offered personal anecdotes, placing Bitcoin among inventions such as the internet and mobile phones. Positive comments from senators, the judiciary and US financial authorities sent the price soaring to its highest price yet, reaching US$900 at one point. At the start of this year, a single coin cost less than US$15.
But the knowledge gap between legislators, law enforcement and Bitcoin developers is still vast. Coalitions of government agencies across borders are beginning to collaborate on addressing the gap. In 2012, the FBI founded the Virtual Currency Emerging Threats Working Group (VCET), which alongside the US department of justice and financial crime agency also collaborates with the UK’s National Crime Agency. However, at times these bodies seem to lack an understanding of the basic principles behind cryptographic currencies.
Depending on existing legislation, countries will also vary in the ease by which they are able to adapt definitions of the currency and ownership. These details are absent from the current policy debate and actually mark the distinctive features and possible future uses of these promising currencies.
Yves here. I was extremely puzzled to see various US regulators make cautiously positive remarks about Bitcoin in Congressional hearings. One would expect them to be opposed. First, Bitcoin is a cash proxy without many of the inconveniences of cash, in particular, the fact that carrying lots of bills to complete large transactions can be conspicuous and inconvenient. That is terribly useful to tax evader and criminals. Second is that if it were to become terribly successful, it would compete with official currencies.
But I now have a guess as to what happened. The officialdom is prisoner of its ideology. Bitcoin is an innovation, ergo it must be good.
The hearings in the US senate last week were the most high profile public discussions that have taken place on the subject of virtual currencies. The US showed its openness by broadcasting the hearing, and it was watched by many Bitcoin enthusiasts around the world. The discussion looked at the potential risks and opportunities Bitcoin and other virtual currencies pose for society, without going into any of the technical details. Senators made analogies with previous technologies and offered personal anecdotes, placing Bitcoin among inventions such as the internet and mobile phones. Positive comments from senators, the judiciary and US financial authorities sent the price soaring to its highest price yet, reaching US$900 at one point. At the start of this year, a single coin cost less than US$15.
But the knowledge gap between legislators, law enforcement and Bitcoin developers is still vast. Coalitions of government agencies across borders are beginning to collaborate on addressing the gap. In 2012, the FBI founded the Virtual Currency Emerging Threats Working Group (VCET), which alongside the US department of justice and financial crime agency also collaborates with the UK’s National Crime Agency. However, at times these bodies seem to lack an understanding of the basic principles behind cryptographic currencies.
In Coins We Don’t trust
Bitcoin was conceived as a currency that did not require any trust between its users. As a result there is no room for a central authority able to resolve disputes and enforce laws. Our traditional financial system has intermediaries that sit on top of the narrow supply of coins and notes in the economy, creating layers of credit services and other financial products. In these account-based systems, individuals trust these institutions – banks, building societies, pension funds, and so on – to keep their wealth safe. But, it is these same trust lines that also facilitate government tax collection and legal enforcement.
At the moment, Bitcoin’s equivalent financial intermediaries are the exchanges used to move money between digital and government-issued currencies. These centralised services use accounts to store users’ Bitcoin and government currencies and hence can be regulated like other forms of money transmission. Since Bitcoin cannot be policed as effectively as normal money, most regulatory work is directed at exchanges. Enforcement within a peer-to-peer, distributed network is difficult. Take cash, for example. There is a reason why it is still the medium of exchange favoured by criminals across the world – without a centralised store and written records, it is harder for authorities to keep track. Likewise, in peer-to-peer file sharing networks, download portals and broadband providers are both subject to regulation and have the responsibility to manage content and user behaviour respectively.
This does not mean enforcement is not possible; there are considerable efforts to ensure self-regulation within the Bitcoin economy. One example is the suggestion that stolen coins should be blacklisted to prevent them from re-entering the money supply. As every Bitcoin transaction is publicly announced this is entirely feasible if the network could find a way of coming to consensus on whether the coins were actually stolen. With the operational failures of so many exchanges and continued problems ensuring funds in online wallets are kept safe, this seems an attractive option to increase adoption of the currency. However, such moves inevitably come at the expense of true decentralisation and blacklisting is controversial among current Bitcoin users. Without a greater appreciation of the technical details behind virtual currencies, regulation will still be limited to the exchanges that sit on top of the Bitcoin protocol. While they serve as the bottleneck between government currencies, the possibility of consumer protection or detection of illicit uses will elude the regulators.
Bitcoin was conceived as a currency that did not require any trust between its users. As a result there is no room for a central authority able to resolve disputes and enforce laws. Our traditional financial system has intermediaries that sit on top of the narrow supply of coins and notes in the economy, creating layers of credit services and other financial products. In these account-based systems, individuals trust these institutions – banks, building societies, pension funds, and so on – to keep their wealth safe. But, it is these same trust lines that also facilitate government tax collection and legal enforcement.
At the moment, Bitcoin’s equivalent financial intermediaries are the exchanges used to move money between digital and government-issued currencies. These centralised services use accounts to store users’ Bitcoin and government currencies and hence can be regulated like other forms of money transmission. Since Bitcoin cannot be policed as effectively as normal money, most regulatory work is directed at exchanges. Enforcement within a peer-to-peer, distributed network is difficult. Take cash, for example. There is a reason why it is still the medium of exchange favoured by criminals across the world – without a centralised store and written records, it is harder for authorities to keep track. Likewise, in peer-to-peer file sharing networks, download portals and broadband providers are both subject to regulation and have the responsibility to manage content and user behaviour respectively.
This does not mean enforcement is not possible; there are considerable efforts to ensure self-regulation within the Bitcoin economy. One example is the suggestion that stolen coins should be blacklisted to prevent them from re-entering the money supply. As every Bitcoin transaction is publicly announced this is entirely feasible if the network could find a way of coming to consensus on whether the coins were actually stolen. With the operational failures of so many exchanges and continued problems ensuring funds in online wallets are kept safe, this seems an attractive option to increase adoption of the currency. However, such moves inevitably come at the expense of true decentralisation and blacklisting is controversial among current Bitcoin users. Without a greater appreciation of the technical details behind virtual currencies, regulation will still be limited to the exchanges that sit on top of the Bitcoin protocol. While they serve as the bottleneck between government currencies, the possibility of consumer protection or detection of illicit uses will elude the regulators.
Depending on existing legislation, countries will also vary in the ease by which they are able to adapt definitions of the currency and ownership. These details are absent from the current policy debate and actually mark the distinctive features and possible future uses of these promising currencies.
http://www.businessinsider.com/german-pmi-2013-12
Spain was much worse than expected. France continues to suck wind. Italy continues to keep a nostril above water.
Germany? Solid as always.
Per its latest PMI report, the manufacturing sector just registered its strongest month since the summer of 2011, for a nearly 2.5 year high.
Here's the stub summary:
Read more: http://www.businessinsider.com/german-pmi-2013-12#ixzz2mJrqut33
Spain was much worse than expected. France continues to suck wind. Italy continues to keep a nostril above water.
Germany? Solid as always.
Per its latest PMI report, the manufacturing sector just registered its strongest month since the summer of 2011, for a nearly 2.5 year high.
Here's the stub summary:
Read more: http://www.businessinsider.com/german-pmi-2013-12#ixzz2mJrqut33
http://www.businessinsider.com/greek-pmi-2013-12
Here's the summary of what's going on, from Markit:
November saw output at Greek manufacturers rise for the first time since September 2009, which in turn helped lift the headline Markit Greece Manufacturing Purchasing Managers’ Index® (PMI® ) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – from 47.3 in October to 49.2, its highest level in 51 months.
New orders meanwhile stabilised after having fallen in the prior month and employment decreased at a slower rate, both developments also contributing to the PMI’s rise. Production levels at Greek manufacturers rose slightly during November, thereby ending a run of contraction that started in late-2009. Growth was confined to just the consumer goods sector, however, with intermediate and capital goods manufacturers recording lower output levels.
Here's the chart showing that the overall manufacturing sector is very close to being in growth again.
Read more: http://www.businessinsider.com/greek-pmi-2013-12#ixzz2mJsPqkoy
Here's the summary of what's going on, from Markit:
November saw output at Greek manufacturers rise for the first time since September 2009, which in turn helped lift the headline Markit Greece Manufacturing Purchasing Managers’ Index® (PMI® ) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – from 47.3 in October to 49.2, its highest level in 51 months.
New orders meanwhile stabilised after having fallen in the prior month and employment decreased at a slower rate, both developments also contributing to the PMI’s rise. Production levels at Greek manufacturers rose slightly during November, thereby ending a run of contraction that started in late-2009. Growth was confined to just the consumer goods sector, however, with intermediate and capital goods manufacturers recording lower output levels.
Here's the chart showing that the overall manufacturing sector is very close to being in growth again.
Read more: http://www.businessinsider.com/greek-pmi-2013-12#ixzz2mJsPqkoy
http://www.businessinsider.com/chart-where-all-the-major-world-economies-are-in-the-economic-cycle-2013-12
Here's a cool chart from Morgan Stanley.
It shows where all of the major world economies are in their respective economic cycles.
The country most closes to "peaking" right now is China. The US, Canada, New Zealand, and Kazakhstan are past the halfway point, but still have room to grow.
Countries like India, Brazil, and Russia are troughing, while Australia, Malaysia, and Thailand are still on the way down, though getting close to the bottom of their respective cycles.
Read more: http://www.businessinsider.com/chart-where-all-the-major-world-economies-are-in-the-economic-cycle-2013-12#ixzz2mJsyjiQ7
Here's a cool chart from Morgan Stanley.
It shows where all of the major world economies are in their respective economic cycles.
The country most closes to "peaking" right now is China. The US, Canada, New Zealand, and Kazakhstan are past the halfway point, but still have room to grow.
Countries like India, Brazil, and Russia are troughing, while Australia, Malaysia, and Thailand are still on the way down, though getting close to the bottom of their respective cycles.
Read more: http://www.businessinsider.com/chart-where-all-the-major-world-economies-are-in-the-economic-cycle-2013-12#ixzz2mJsyjiQ7
http://www.businessinsider.com/jp-morgan-economist-responds-to-pope-2013-12
In a new research note, JP Morgan Chase economist James Glassman doesn’t mention Pope Francis by name, but clearly had his comments in mind as he addressed the record of market economies:
Those concerned about global poverty have more to be thankful today than to complain about. The commonly-heard complaints that today’s economic systems fail to address the plight of the poor ignore several fundamental facts.
Poverty is not a modern phenomenon. Second, the developed economies are still recovering from deep recessions and in time will reach their full potential. That is, of course, why central bank policies remain so stimulative. Those hurt by the recession will be restored as the developed economies continue to recover. And third, despite the cyclical problems of the developed economies, the average global living standard is at a record high—the highest known in the records compiled by economists and still climbing, thanks to the support from the developed economies.
In other words, market-oriented economic systems are doing more to cure global poverty than any other effort in the past. …
Read more: http://www.businessinsider.com/jp-morgan-economist-responds-to-pope-2013-12#ixzz2mK0ME9Rr
In a new research note, JP Morgan Chase economist James Glassman doesn’t mention Pope Francis by name, but clearly had his comments in mind as he addressed the record of market economies:
Those concerned about global poverty have more to be thankful today than to complain about. The commonly-heard complaints that today’s economic systems fail to address the plight of the poor ignore several fundamental facts.
Poverty is not a modern phenomenon. Second, the developed economies are still recovering from deep recessions and in time will reach their full potential. That is, of course, why central bank policies remain so stimulative. Those hurt by the recession will be restored as the developed economies continue to recover. And third, despite the cyclical problems of the developed economies, the average global living standard is at a record high—the highest known in the records compiled by economists and still climbing, thanks to the support from the developed economies.
In other words, market-oriented economic systems are doing more to cure global poverty than any other effort in the past. …
Read more: http://www.businessinsider.com/jp-morgan-economist-responds-to-pope-2013-12#ixzz2mK0ME9Rr
http://blogs.reuters.com/felix-salmon/2013/11/22/the-government-dominated-bond-market/#comments
This chart alone suffices to explain why the markets care so much about the taper: central-bank buying accounts for $1.6 trillion — more than half — of the total demand for bonds in 2013. Meanwhile, private banks are taking the opposite side of the trade: while they were huge buyers of bonds in 2007 and 2008, they’re net sellers in 2013 and 2014, more or less completely negating the buying pressure from pension funds, insurance companies, bond funds, and retail investors. In 2014, it seems, substantially all the net demand for bonds is going to come from the official sector. So it matters a great deal when that demand is diminished.
What’s more, central-bank buying, overwhelmingly from the Fed and the Bank of Japan, accounts for the lion’s share of official-sector buying: sovereign wealth funds and other foreign official institutions will buy just $364 billion of bonds this year, according to JP Morgan’s estimates, down from $678 billion last year. So the heavy lifting is still going to have to be conducted by QE operations, in the face of a taper which JP Morgan estimates at $500 billion over the course of the year. (The assumption is that it starts in January, and is completed by September.) Between the taper and other sources of diminished demand, total bond-buying firepower is likely to be $750 billion smaller in 2014 than it was in 2013. Bad news, for bonds, right? Not so fast! It turns out that even as demand for bonds is shrinking, the supply of new bonds is shrinking just as fast:
Again, this chart surprised me: I knew that government debt was a very important part of the total bond market, but I wouldn’t have guessed how important it was — or how fast it is shrinking. Panigirtzoglou puts the two charts together, and you end up with this result:
That number has pretty large error bars: you could pretty much cover the entire thing just by delaying the taper for three months. So let’s not worry too much about the difference between the two estimates, here. Instead, step back and look at the big picture, which is pretty simple: as a stylized fact, the bond market is dominated on both sides by the official sector. Private participants might sit in the middle as market-makers, or try to borrow money here or there, but overall what you’re looking at, when you look at the bond market, is government issuing debt and governments buying it.
The good news is that this large transfer of money from the official sector’s left hand to its right hand is slowing down, but that’s going to take a while. In any case, there doesn’t seem to be any conceivable way that the private sector could possibly be able to fund the still-substantial government deficits which have been bequeathed to us by the financial crisis. As a result, I suspect that QE is likely going to be around for a while, just as a matter of mathematical necessity. The world’s national deficits can’t get funded any other way.
This chart alone suffices to explain why the markets care so much about the taper: central-bank buying accounts for $1.6 trillion — more than half — of the total demand for bonds in 2013. Meanwhile, private banks are taking the opposite side of the trade: while they were huge buyers of bonds in 2007 and 2008, they’re net sellers in 2013 and 2014, more or less completely negating the buying pressure from pension funds, insurance companies, bond funds, and retail investors. In 2014, it seems, substantially all the net demand for bonds is going to come from the official sector. So it matters a great deal when that demand is diminished.
What’s more, central-bank buying, overwhelmingly from the Fed and the Bank of Japan, accounts for the lion’s share of official-sector buying: sovereign wealth funds and other foreign official institutions will buy just $364 billion of bonds this year, according to JP Morgan’s estimates, down from $678 billion last year. So the heavy lifting is still going to have to be conducted by QE operations, in the face of a taper which JP Morgan estimates at $500 billion over the course of the year. (The assumption is that it starts in January, and is completed by September.) Between the taper and other sources of diminished demand, total bond-buying firepower is likely to be $750 billion smaller in 2014 than it was in 2013. Bad news, for bonds, right? Not so fast! It turns out that even as demand for bonds is shrinking, the supply of new bonds is shrinking just as fast:
Again, this chart surprised me: I knew that government debt was a very important part of the total bond market, but I wouldn’t have guessed how important it was — or how fast it is shrinking. Panigirtzoglou puts the two charts together, and you end up with this result:
In total we expect bond supply to decline by $600bn in 2014 to $1.8tr, more than offsetting the $500bn decline in bond demand due to Fed tapering. The balance between supply and demand, i.e. excess supply, looks set to widen from $140bn in 2013 to $280bn in 2014.
That number has pretty large error bars: you could pretty much cover the entire thing just by delaying the taper for three months. So let’s not worry too much about the difference between the two estimates, here. Instead, step back and look at the big picture, which is pretty simple: as a stylized fact, the bond market is dominated on both sides by the official sector. Private participants might sit in the middle as market-makers, or try to borrow money here or there, but overall what you’re looking at, when you look at the bond market, is government issuing debt and governments buying it.
The good news is that this large transfer of money from the official sector’s left hand to its right hand is slowing down, but that’s going to take a while. In any case, there doesn’t seem to be any conceivable way that the private sector could possibly be able to fund the still-substantial government deficits which have been bequeathed to us by the financial crisis. As a result, I suspect that QE is likely going to be around for a while, just as a matter of mathematical necessity. The world’s national deficits can’t get funded any other way.
