Sunday, October 12, 2014

Today's Links

1--Eurozone on cusp of triple-dip recession as German exports crumble , Telegraph
Germany's Wise Men slash their growth forecasts for next year and call for fiscal stimulus, warning that the ECB's 'QE-lite' will achieve nothing

2---Dam breaks in Europe as deflation fears wash over ECB rhetoric, Telegraph
We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,' warns RBS

3--Investors Gird For Scarier Days In Markets, BI

Volatility has suddenly returned to U.S. stocks, and for the first time all year it doesn't appear that the weakness in equities will go away quietly in the span of a few days.
While the S&P 500 is still up 3.1 percent for the year, the index is off about 5 percent from its record high reached in mid-September, and closed out this week at the lowest level since May 23.
"We're still in a bull market, but in the near term things are a little bit dicey, and I don't think the decline is over with yet," said Jeffrey Saut, chief investment strategist at Raymond James Financial in St. Petersburg, Florida.

The S&P 500 and Nasdaq posted their biggest weekly declines since May 2012, and the Dow Jones industrial average ended Friday in negative territory for the year.
The S&P also posted back-to-back intraday moves of more than 40 points this week for the first time in three years. Wall Street's fear gauge, the CBOE Volatility Index <.VIX>, ended at 21.24 on Friday, its highest level since early February.

Investors said they were concerned about the eventual end of Federal Reserve stimulus, as well as weak growth overseas and its potential effect on U.S. earnings. The slide in oil prices has also served as a harbinger for poor demand, and investors in general got caught betting heavily on further market gains at a time when this stew boiled over...

The only S&P 500 sectors to gain since the market's Sept. 18 high are defensive - utilities and consumer staples. This week also saw the biggest weekly inflow on record to U.S. taxable bond funds, while nearly $7 billion left stock funds.

4---Its still the economy, stupid, smirking chimp

During this recovery there's been a hollowing out of the middle class; the erosion of decent middle-class jobs. Most of the recovery proceeds went to the top one percent. This chart shows that during the Obama recovery (2009-present) average income growth was 6 percent. But the top 1 percent experienced income growth of 31.4 percent and the bottom 99 percent had a pitiful .4 percent. A recent study by the Center For American Progress found that
for a typical median income married couple with two children, the collective cost of basic pillars of middle class security -- including child care, higher education, health care, housing, and retirement -rose by an estimated $10,600 between 2000 and 2012... but [the family] earned less than one percent more

5---Repeat: Syria intervention plan fueled by oil interests, not chemical weapon concern

8---Poor nations ‘pushed into new debt crisis’, Guardian
Jubilee Debt Campaign says as many as two-thirds of 43 developing countries it analysed are at risk over next decade

9--Rep. McKeon: Generals Want Ground Troops for Iraq War  antiwar        

Insists Ground Troops Are Necessary for Conflict

10--Erdogan’s expansionist dreams in Syria, press tv

11--US will commission missile base in Europe amid tensions with Russia, press tv

12--Harvard students say US bigger threat than ISIL, press tv

13--Why You Have Every Right To Demand A Raise, In 1 Chart, gongloff

This is a chart of how much of the corporate-income pie that workers get for themselves in wages and benefits. It was made by the Economic Policy Institute, a think tank focused on labor issues. That share hit a peak of nearly 84 percent right around the turn of the millennium. It is currently at about 74 percent, near its lowest point since 1950

14--Should you fear the October stock-market curse? marketwatch

And there certainly appears to be something unusual about October: Three of the past five shifts in major trends have taken place in October. They were:
  • Oct. 9, 2002: The end of the 2000-2002 bear market, which began with the bursting of the Internet bubble.
  • Oct. 9, 2007: The end of the 2002-2007 bull market.
  • 15--Economic Conditions Bloomberg
  • In the broader economy, consumers are buying again and homebuilding is increasing. The unemployment rate has declined to 6.1 percent, the lowest since 2008. The economy expanded at a 4.6 percent annualized rate in April through June, after a 2.1 percent contraction in the first quarter marred by poor winter weather conditions. The last time the economy was growing so fast was in the first quarter of 2006.
    Meanwhile, the economies of Europe and Japan are sluggish. The recovery for the euro area -- including the countries France and Italy -- stalled, with gross domestic product unchanged from the first quarter to the second, according to Eurostat, the European Union’s statistics office in Luxembourg. Japan contracted by the most in more than five years, with GDP shrinking an annualized 7.1 percent, data from the government Cabinet Office in Tokyo show...

  • Fed Policies

    Companies have also refinanced debt at lower cost thanks to the Fed, not Obama, said HighMark Capital’s Lowenstein. Corporate bond issues in the U.S. this year have exceeded $1.2 trillion, topping 2013’s record pace, according to data compiled by Bloomberg.
    The central bank has kept its target for the overnight interbank interest rate at zero to 0.25 percent since December 2008.
    “That’s been a huge benefit to their margin structure in terms of lowering the cost of debt,” Lowenstein said. “It’s been one of the pillars of peak profits.”

  • 15---A Great Ride, but Reality Is Returning (archive 2013) NYT

  • we may not see how special the market has been. At the opening bell of 2012, it began rising and didn’t go below that starting level for the rest of the year. The same thing happened in 2013. With a notable exception last spring, the trend has been relentlessly upward.
    The Standard & Poor’s 500-stock index has returned 30.2 percent so far this year, including dividends. If it maintains that level through Dec. 31, this will be the best year since 1991, when the index returned 30.5 percent, according to data compiled by the Bespoke Investment Group.
    But even those outstanding numbers don’t really do the market justice. The steady upward bias and the lack of sharp declines, or tail risk, are extremely unusual. After all, the market has risen without having a single day with a decline of 3 percent in either 2012 or 2013; typically, there would be more than 3 such days in a period that long, according to the calculations of Salil Mehta, an independent statistician and econometrician who teaches at Georgetown and writes the wonky blog Statistical Ideas.

  • 18---Black Thursday approaches, Wikipedia Oct 24

  • The crash followed a speculative boom that had taken hold in the late 1920s. During the later half of the 1920s, steel production, building construction, retail turnover, automobiles registered, even railway receipts advanced from record to record. The combined net profits of 536 manufacturing and trading companies showed an increase, in fact for the first six months of 1929, of 36.6% over 1928, itself a record half-year. Iron and steel led the way with doubled gains.[21] Such figures set up a crescendo of stock-exchange speculation which had led hundreds of thousands of Americans to invest heavily in the stock market. A significant number of them were borrowing money to buy more stocks. By August 1929, brokers were routinely lending small investors more than two-thirds of the face value of the stocks they were buying. Over $8.5 billion was out on loan,[22] more than the entire amount of currency circulating in the U.S. at the time.[17][23]
    The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. Because of margin buying, investors stood to lose large sums of money if the market turned down—or even failed to advance quickly enough. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929,[24] clearly above historical norms

  • 19--Dows biggest gains and losses

  • 20--Black Tuesday

  • 21---The panic began again on Monday (October 28), with the market closing down 12.8 percent. On Black Tuesday (October 29) more than 16 million shares were traded. The Dow Jones Industrial Average lost another 12 percent and closed at 198—a drop of 183 points in less than two months. Prime securities tumbled like the issues of bogus gold mines. General Electric fell from 396 on September 3 to 210 on October 29. American Telephone and Telegraph dropped 100 points. DuPont fell from a summer high of 217 to 80, United States Steel from 261 to 166, Delaware and Hudson from 224 to 141, and Radio Corporation of America (RCA) common stock from 505 to 26. Political and financial leaders at first affected to treat the matter as a mere spasm in the market, vying with one another in reassuring statements. President Hoover and Treasury Secretary Andrew W. Mellon led the way with optimistic predictions that business was “fundamentally sound” and that a great revival of prosperity was “just around the corner.” Although the Dow Jones Industrial Average nearly reached the 300 mark again in 1930, it sank rapidly in May 1930. Another 20 years would pass before the Dow average regained enough momentum to surpass the 200-point level.

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