Stanford’s Taylor: Fed Interventions Are Dangerous

…but it’s working for now and that is all anyone care about ….

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The Greek central bank – whatever that is: some local subsidiary of the ECB? – released February corporate and household deposit data. The chart below explains it all: back to May 2006 levels and the run shows no sign of abating And remember Venizelos’ sage February words of advice?“VENIZELOS SAYS NOW IS THE TIME FOR DEPOSITS TO RETURN TO BANKS“… that didn’t work too well.

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“(Reuters) – Leaders of the BRICS group of emerging market nations pressed Western powers to cede more voting rights at the IMF this year and flayed the rich world’s reflationary monetary policies for putting global economic stability in jeopardy.

“This dynamic process of reform is necessary to ensure the legitimacy and effectiveness of the Fund,” Brazil, Russia, India, China and South Africa said in a joint declaration after their one-day summit in New Delhi.

“We stress that the ongoing effort to increase the lending capacity of the IMF will only be successful if there is confidence that the entire membership of the institution is truly committed to implement the 2010 Reform faithfully.”

Promised changes to voting rights at the IMF have yet to be ratified by the United States, adding to frustration over reform of the G7 and the U.N. Security Council, where India and Brazil have been angling for years for permanent seats.

The BRICS leaders also accused rich countries of destabilizing the world economy five years into the global financial crisis.

“It is critical for advanced economies to adopt responsible macroeconomic and financial policies, avoid creating excessive global liquidity and undertake structural reforms to lift growth that create jobs,” they said in a joint declaration.

The rich world’s monetary policy “brings enormous trade advantages to developed countries, and results in unfair obstacles for other countries,” Brazil’s President Dilma Rousseff said at the summit.”

Hurrah….

MM flying high up 100%

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“Morgan Stanley’s economics team led by Joachim Fels just raised its estimate for 2012 global GDP growth to 3.7 percent from 3.5 percent.

The primary reason for this was a huge upward revision in their China GDP estimate.

From their note to clients:

In China, where our previous above-consensus forecast of 8.4% 2012 GDP growth had become (published) consensus in recent months, we raise our forecast to 9.0%, one of the highest in the Street. As Helen Qiao and her China team explain in more detail in a companion note, this is essentially a call on additional macro stimulus being implemented in the very near term in response to somewhat disappointing results during the first few months of the year. In addition to further RRR cuts, OMO and window guidance intensification, we expect the government to support loan demand by lowering the benchmark interest rate by 25bp at least once, resuming infrastructure investment projects, as well as promoting first-time home purchase and developers’ ‘regular commodity housing’ construction to smooth the cycle.

Fels says that Morgan Stanley also upped its growth estimate for Japan.

In Japan, the upward revision from 1.1% to 1.8% largely reflects a better-than- expected ramp into the year and stronger capex assumptions.

But things aren’t completely rosy.  Fels warns that risks are heavily skewed to the down side.

Risks remain skewed to the downside… with old (potential political gridlock leading to fiscal tightening next year in the US, or a euro crisis) and new (oil price) hazards each being serious enough to potentially derail the recovery: the distance between our bear case and our base case for global growth is 1pp, twice the distance between base and bull.”

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“Please consider a series of chart my friend “BC” put together of various indices vs. the Morgan Stanley Commodity Related Equity Index ($CRX).

What is the Commodities Sector Seeing that the Stock Market Doesn’t?

The answer from my friend Pater Tenebrarum who also saw these charts is “the coming economic bust in China – which has likely already begun.”

That idea is in-line with several of my recent posts …

• Hidden Losses and Little Reform; China May Be Slowing More Than You Think
• World Bank Warns of Economic Crisis in China; Only 3% Growth for Decade Says Michael Pettis
• “Curbs Needed to Avoid China Property Chaos” Says China’s Premier; Chinese Economy Already in Hard Landing? Regardless, It’s Too Late to Prevent Chaos
• Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions

Below, the four charts that show it all.

$SPX vs. $CRX

Global Economic Analysis

$CYC vs. $CRX

Global Economic Analysis

$TRAN vs. $CRX

Global Economic Analysis

$DJUSRR vs. $CRX

Global Economic Analysis

Read more: http://globaleconomicanalysis.blogspot.com/2012/03/question-of-day-what-is-commodities.html#ixzz1qVsH4k8h

To the moon and beyond….

Well it’s about fucking time.

Full Article

Glad they got him!

“Recent economic data suggest the U.S. economy will power ahead of Europe in the first half of 2012, with consumers growing increasingly confident and boosting activity in the former while more reforms are needed in the latter to boost growth, the Organization for Economic Cooperation and Development (OECD) said in a report on Thursday.

Martin Barraud | OJO Images | Getty Images

“In the United States, growth prospects continue to firm,” the organization said. “The rebound in equity prices, stronger consumer confidence, and growth in nonfarm payroll employment have lifted projected activity.”

The improved outlook was also reflected in better consumer confidence, increased motor vehicle sales, industrial production and credit growth, it said.

The OECD warned, however, that high oil prices, as well as the housing market, which remains fragile, pose a threat to the recovery in the United States.

The improved outlook for the U.S. contrasts with a weak outlook for Europe.

“The situation for the three largest euro area countries in aggregate is expected to remain fragile, with negative growth projected for the first quarter of 2012 and a moderate rebound in the second quarter,” according to the OECD….”

Read and watch more 

Gapping up

GALE +15%, RHT +8.3%, LORL +5.2%, FOSL +2.6%, ILMN +2.2%, FUL +1.3%,

Gapping down

CHTP -30.5%, SABA -7%, ONTY -4.6%, MOS -1.8%, FTE -1.7%, ZNGA -0.7%,

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Fossil Inc. (FOSL) : The watchmaker was picked by Standard & Poor’s to replace Medco Health Solutions Inc. (MHS) , which is being taken over, in the S&P 500 on a date to be announced.BioMed Realty Trust Inc. (BMR) will take Fossil’s place in the S&P MidCap 400 Index, whileInnophos Holdings Inc. (IPHS) will replace BioMed in the S&P SmallCap 600.

Google Inc. (GOOG) : The search-engine operator was rated buy in new coverage at ThinkEquity LLC with a price estimate of $714.

Paychex Inc. (PAYX) : The Rochester, New York-based payroll services company for small businesses reported third- quarter earnings that met analyst projections and reiterated its yearly forecast for net income to increase 5 percent to 7 percent, compared with analyst estimates for 7 percent.

Red Hat Inc. (RHT) : The software maker that specializes in the Linux operating system and other open-source programs’ fourth-quarter adjusted earnings and revenue that exceeded analyst forecasts, according to the average estimates in a Bloomberg survey. The company also said it approved a program to repurchase as much as $300 million of its stock.

Verint Systems Inc. (VRNT) : The maker of software that helps businesses analyze performance forecast first-quarter revenue of at least $860 million, beating the $858.5 million average estimate of two analysts surveyed by Bloomberg.

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Alcatel-Lucent S.A. (NYSE: ALU) Maintained Sell with $2.00 target at S&P.

Amazon.com, Inc. (NASDAQ: AMZN) Started as Buy at ThinkEquity.

Apollo Group Inc. (NASDAQ: APOL) Cut to Hold at Argus.

ArcelorMittal (NYSE: MT) Raised to Neutral at BNP Paribas.

AT&T Inc. (NYSE: T) Cut to Neutral at Baird.

Cypress Semiconductor Corporation (NASDAQ: CY) Raised to Buy at Lazard (late Wednesday call).

Delek US Holdings Inc. (NYSE: DK) Raised to Outperform at Credit Suisse; named as value stock of the day at Zacks.

eBay Inc. (NASDAQ: EBAY) Started as Buy at ThinkEquity.

Express Scripts Inc. (NASDAQ: ESRX) Reiterated Buy and raised target from $65 to $67 at BofA/ML.

Google Inc. (NASDAQ: GOOG) Started as Buy at ThinkEquity.

HollyFrontier Corporation (NYSE: HFC) Cut to Neutral at Credit Suisse.

Janus Capital Group, Inc. (NYSE: JNS) Cut to Hold at Jefferies.

Las Vegas Sands (NYSE: LVS) Reiterated Buy and raised target from $60 to $65 at BofA/ML.

Logitech International (NASDAQ: LOGI) named Bear of the Day at Zacks.

Nordstrom Inc. (NYSE: JWN) Raised to Buy at Goldman Sachs.

Potash Corp. of Saskatchewan (NYSE: POT) Started as Buy at Stifel Nicolaus.

Verizon Communications Inc. (NYSE: VZ) Cut to Neutral at Baird.

The Washington Post Co. (NYSE: WPO) named Bull of the Day at Zacks.

Whole Foods Market, Inc. (NASDAQ: WFM) Cut to Neutral at Goldman Sachs.

Yahoo! Inc. (NASDAQ: YHOO) Started as Hold at ThinkEquity.

In Play

On the Wires 

Last weeks initial claim revision jumped to 364k from 348k.

Continuing claims: Prior 3352k, Market expects 3385k, Actual 3340k.

Stock is off a bit in premarket trade…

“The Standard & Poor’s 500 Index (SPX) will likely remain stuck in the 500-point range where it’s been four-fifths of the time since 2000 until the Federal Reserve allows interest rates to rise, according to Piper Jaffray Cos.

The benchmark measure fell in the previous two days after reaching 1,416.51, the highest level since May 2008 and 9.5 percent below its record high of 1,565.15 from 2007. The index has traded between 1,000 and 1,500 for about 80 percent of the time since 2000, according to data compiled by Bloomberg.

Equity gains stalled in the past 12 years as the economy suffered from the bursting of bubbles in technology and real estate, forcing the central bank to cut its benchmark interest rate to near zero from 6.5 percent to spur growth. Fed Chairman Ben S. Bernanke has pledged to keep borrowing costs low through at least late 2014.

“The S&P 500 is approaching the upper end of the secular trading range,” Craig W. Johnson, a Minneapolis-based technical market strategist with Piper Jaffray, wrote in a note yesterday. “This resistance will likely remain intact until 2014-2015, and will correspond with a secular change in bond yields.”

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“Consider the following numbers: 2.2, 62.8, 454, 5.9. Drawing a blank? Not to worry. They don’t mean much on their own.

Now consider them in context:

1) 2.2 percent is the average interest rate on the U.S. Treasury’s marketable and non-marketable debt (February data).

2) 62.8 months is the average maturity of the Treasury’s marketable debt (fourth quarter 2011).

3) $454 billion is the interest expense on publicly held debt in fiscal 2011, which ended Sept. 30.

4) $5.9 trillion is the amount of debt coming due in the next five years.

For the moment, Nos. 1 and 2 are helping No. 3 and creating a big problem for No. 4. Unless Treasury does something about No. 2, Nos. 1 and 3 will become liabilities while No. 4 has the potential to provoke a crisis.

In plain English, the Treasury’s reliance on short-term financing serves a dual purpose, neither of which is beneficial in the long run. First, it helps conceal the depth of the nation’s structural imbalances: the difference between what it spends and what it collects in taxes. Second, it puts the U.S. in the precarious position of having to roll over 71 percent of its privately held marketable debt in the next five years — probably at higher interest rates….”

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“Spanish transport, power demand and manufacturing were disrupted today in the first general strike against labor reforms and austerity policies since Prime Minister Mariano Rajoy took office three months ago.

Iberia, the Spanish unit of International Consolidated Airlines Group SA (IAG), said it canceled 65 percent of flights, while national power demand was 16 percent below that of a typical day, grid operator Red Electrica Corp SA data showed. At Volkswagen AG (VOW3) and Renault SA (RNO) factories, 100 percent of workers followed the strike during the nightshift, the Comisiones Obreras union said in a statement.

The People’s Party government “will not cede” to union demands to retract changes to labor rules, Budget Minister Cristobal Montoro said yesterday. Thirty percent of workers planned to strike, according to a poll by El Pais.

While Rajoy’s measures have angered unions and undermined support for the party in a regional election on March 25, the government is still struggling to convince investors its policies are enough to restore the public finances and reduce a 23 percent jobless rate. Spanish 10-year borrowing costs have surged almost 50 basis points since the start of March.

“He has no choice,” said Antonio Barroso, a political analyst at Eurasia Group in London and a former government pollster. “If he gives in, the markets will punish Spain. Rajoy has his back against the wall.”

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