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By Tyler Durden

Once again, on a Saturday night (US time), Sunday morning (China) a sudden burst of buying pressure in Bitcoin, driven by Chinese buyers, has spiked the virtual currency higher on dramatic volume. With Bitcoin now trading at its highest level since May 2014 (in Yuan), and up 250% since we first suggested this an outlet for desperate-to-leave capital outflows in September, we note that the 'arbitrage' of over 150 Yuan points to massively more demand from Chinese buyers for now.

It appears, just as we initailly warned here, that more than a few of the few hundred million Chinese have decided that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decided to invest even a tiny fraction of the $22 trillion in Chinese deposits…

… in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

And once again tonight, that panic selling of Yuan for Bitcoin has sent it surging in the last few hours, now above $600…

This pushes Bitcoin to 2 year highs priced in USDollars…

And once again it appears the dominant buyer is in China (OKCoin exchange – which reportedly has 90% of global Bitcoin traffic). This is the highest 'China' Bitcoin price since May 2014

Notably with Bitcoin trading 4187CNY and 615USD (with USDCNY at 6.5624), China Bitcoin is trading around 150 Yuan rich to Dollar Bitcoin (once again suggesting strong demand from Chinese buyers).

Both Gold and Bitcoin have been rising since we first warned of the surge in Chinese capital outflows but the virtual currency has dramatically outperformed…

Charts: BitcoinWisdom

…read more

Source: Bitcoin Spikes Above $600 – 2 Year Highs – On Sudden Massive Chinese Buying

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By Tyler Durden

Submitted by Doug Casey via InternationalMan.com,

I think there are really only two good reasons for having a significant amount of money: To maintain a high standard of living and to ensure your personal freedom. There are other, lesser reasons, of course, including: to prove you can do it, to compensate for failings in other things, to impress others, to leave a legacy, to help perpetuate your genes, or maybe because you just can't think of something better to do with your time.

But I'll put aside those lesser motives, which I tend to view as psychological foibles. Basically, money gives you the freedom to do what you'd like – and when, how, and with whom you prefer to do it. Money allows you to have things and do things and can even assist you to be something you want to be. Unfortunately, money is a chimera in today's world and will wind up savaging billions in the years to come.

As you know, I believe we're well into what I call The Greater Depression. A lot of people believe we're in a recovery now; I think, from a long-term point of view, that is total nonsense. We're just in the eye of the hurricane and will soon be moving into the other side of the storm. But it will be far more severe than what we saw in 2008 and 2009 and will last quite a while – perhaps for many years, depending on how stupidly the government acts.

Real Reasons for Optimism

There are reasons for optimism, of course, and at least two of them make sense.

The first is that every individual wants to improve his economic status. Many (but by no means all) of them will intuit that the surest way to do so is to produce more than they consume and save the difference. That creates capital, which can be invested in or loaned to productive enterprises. But what if outside forces make that impossible, or at least much harder than it should be?

The second reason for optimism is the development of technology – which is the ability to manipulate the material world to suit our desires. Scientists and engineers develop technology, and that also adds to the supply of capital. The more complex technology becomes, the more outside capital is required. But what if sufficient capital isn't generated by individuals and businesses to fund further technological advances?

There are no guarantees in life. Throughout the first several hundred thousand years of human existence, very little capital was accumulated – perhaps a few skins or arrowheads passed on to the next generation. And there was very little improvement in technology – it was many millennia between the taming of fire and, say, the invention of the bow. Things very gradually accelerated and improved, in a start-stop-start kind of way – the classical world, followed by the Dark Ages, followed by the medieval world. Finally, as we entered the industrial world 200 years ago, it looked like we were on an …read more

Source: How Fascism Comes To America

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By Tyler Durden

While everyone loves to focus on the headline unemployment rate as a reason to say the economy is doing well, especially those at the Fed trying to justify hiking rates into a recession, or those in the current administration trying to establish a legacy of being a market whisperer, the facts get in the way of that narrative.

We continuously remind those who are interested in the truth that the number of Americans who are no longer in the labor force has hit an all time high of 94.7 million. If one were to factor in the low labor force participation rate, the actual unemployment rate would be significantly higher than the 4.7% headline.

According to CLSA economists, who have updated an analysis we first did in the summer of 2010, if the participation rate stayed at the levels before the financial crisis, the unemployment rate would be 9.6%, more than double what it is today.

So the next time you hear that the economy is doing well because of “falling unemployment”, refer them the “fringe” CLSA economists, and whatever you do, don’t tell the Washington Post.

…read more

Source: Real Unemployment Rate More Than Double The Official Number, CLSA Finds

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Move over Apple! Google is now the most valuable brand in the world, according to a BrandZ ranking.

…read more

Source: The 10 most valuable brands of 2016

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By Tyler Durden

Submitted by MN Gordon via Economic Prism blog, (annotated by Acting-Man's Pater Tenebrarum),

Beyond Human Capacity

Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy. The inputs are too vast. The relationships are too erratic.

The economy – complex and ever-changing interrelations.

Image credit: Andrea Dionne

Quite frankly, keeping tabs on it all is beyond human capacity. This also goes for the federal government. Even with all their data gatherers and number crunchers they are incapable of stitching together an exact understanding of where the economy is really at, let alone where it is going.

What’s more, the economy is always evolving and changing in ways that are hard to discern in advance. Cause and effect do not correlate with the simple precision of a balance scale. When one input decreases, an apparently correlated one can somehow increase.

For example, when incomes go down, apartment rents should also go down. Lower incomes should result in lower price competition for apartment rents and, thus, lower rents. Logic would support the inherent truth of this premise.

Yet, in Sacramento California, and many other places, the exact opposite has happened. Median incomes have declined 13 percent, while median apartment rents have increased 13 percent. How does that work?

Perhaps too burdensome development regulations have something to do with it. Or maybe lasting fallout from the great mortgage bust is the culprit. Certainly, the shortage of affordable rentals is driven by a great variety of factors.

Stranger than Fiction

Our intent is not to scratch for a conclusion to the Sacramento income vs. rental price conundrum. We’re merely holding it up as an example of one market enigma, as perceived by our own predisposed biases. Indeed, our own subjective preferences cloud our thinking.

No doubt, many market movements seem stranger than fiction. But they happen all the same. It doesn’t matter if we expect them. Nor does it matter if we agree with them.

Of course, the strangest market of all is the stock market. Just ask any stock picker. If they’re honest, they’ll admit to being right about 50-percent of the time. In other words, their efforts are as accurate as a coin toss.

Dow Jones Industrial Average, daily. The “bad news is good news” market is back – for now – click to enlarge.

Confounding the price and earnings ratios of stocks is the largesse of monetary gas blowing into the market. Apparent distortions and irrational movements are pushed farther and wider than any honest individual would expect or think to be possible. Theories are even concocted to explain this strange reality.

One critical insight of late is that bad news for the economy is good news for stocks. Conversely, good news for the economy is bad news for stocks. In practice this will be proved to always be true until the moment it isn’t anymore. …read more

Source: Too Vast To Manage – Why Monetary Central Planning Must Fail

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By Tyler Durden

Submitted by Samuel Bryan via SchiffGold.com,

On June 7, the Washington DC Council voted to raise the city’s minimum wage to $15 per hour. DC joins New York and California, along with a number of major US cities that have made the move to boost the minimum wage over the last year.

The DC Council’s vote was a major symbolic victory for supporters of the well-organized “Fight for $15” campaign.

According to the Washington Post, the effort resonates with Americans:

Polls find strong support for a $15 wage floor as many Americans have become frustrated by the loss of well-paying manufacturing jobs and the growth of low-paying retail and service jobs.”

Last spring, ReasonTV asked residents of the “trendy, hipster enclave” of Silver Lake in Los Angeles, “What is the ‘right’ minimum wage?” Unsurprisingly, most assumed a higher minimum wage is a no-brainer – a win-win for society and workers.

Presidential candidate Bernie Sanders has made a federal $15 minimum wage part of his campaign platform. Hillary Clinton has indicated she would support a gradually phased in federal $15 minimum.

As the Post reports the movement is clearly gaining significant steam:

The District’s move is the latest in a series of unexpected and rapid-fire victories for the $15-minimum-wage movement. What began as an audacious push by fast-food workers just a few years ago is evolving into a new labor standard, with state lawmakers in California and New York agreeing to implement a $15 minimum wage by 2022, and legislatures in Connecticut, Massachusetts, and New Jersey weighing similar measures.”

The current economic climate makes the push for $15 understandable. DC Mayor Muriel E. Bowser described the situation faced by DC residents, and it reflects realities across the US:

When I see how much it costs to live in Washington, D.C. — and that cost is only going up — we know that it takes more money for every household to be able to afford to live. There are families working day in and day out, sometimes two or three jobs but barely making ends meet.”

But is a $15 minimum wage really the solution to what is a very real problem?

Some ominous signs indicate it may actually make things worse. A recent New York Post article highlighted how New York City car washes tend to be less automated than in other parts of the country because the city has a labor pool willing to do that kind of work with relatively low pay.

But these workers will likely find themselves without a job as the New York minimum wage takes effect:

How does taking away their jobs make them better off? The $15 minimum will push New York car-wash operators to automate like the rest of the country, denying workers the right to undercut the machines on cost. It’s already starting to happen. Amir Malki, a leading car-wash equipment installer in the region, says over a dozen car-wash operators in New York City have inquired about putting in equipment to eliminate workers.”

All we have to do to …read more

Source: "We Don’t Have A Wage Problem; We Have A Money Problem"

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By Tyler Durden

Spot the difference…

People of Presidential Campaign Payrolls (by month)…

Can David slay Goliath again?

Source: Contra Corner blog

…read more

Source: Chart Of The Day: "Big" vs "Small" Government

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By Tyler Durden

As we know, companies beating analyst estimates isn't really a big deal. After all, analysts need to maintain access to management and ensure everyone is sending buy orders through the brokerage, so it makes little sense to set expectations too high.

However, the way companies are exceeding analyst expectations is worth noting. According to a survey by Morgan Stanley, analysts responded that if firms exceed expectations to the upside, it was typically due to lower costs than higher revenues. Said otherwise, companies are not generating the top-line growth necessary to beat even the lowest of analyst expectations, and have focused on driving cost out in order to meet the street's expectations. After all, if the numbers miss, executives don't get as much out of those options and RSUs, and we can't be having that.

From Morgan Stanley

At the economy-wide level, corporate profits were down 7.1% year/year in 1Q16, a fourth consecutive decline, and after-tax profits have fallen 15.5% in the six quarters since their peak in 3Q14. With profits coming under pressure, analysts' responses in our survey have increasingly pointed to lower costs (expenses) as the primary reason why companies have exceeded estimates to the upside, while higher top-line growth has been cited much less frequently as a driver of any upside in earnings.

Cost reduction efforts lead to another important discussion, which is that if firms are reducing costs so the street is happy, then implicitly hiring is not part of the future plan. This is confirmed with Morgan Stanley's hiring plans index, which has grown increasingly worse since the end of 2014, with cost reduction efforts intensifying shortly thereafter.

The cost reduction efforts along with lower plans for hiring have of course led to a slowing trend in actual payroll growth, as MS points out.

The slowdown in hiring plans has tracked the trend of cost-reduction in company earnings fairly closely (Exhibit 4), and has also coincided with the slowing in trend payroll growth (Exhibit 5), offering some evidence that headwinds from earnings pressure in the corporate sector may indeed be a factor behind the recent slowdown in hiring.

All of this of course leads to payroll numbers like we saw for May, when a meager 38,000 jobs were added.

* * *

The overall point is that companies aren't getting the top line cover needed to hit analyst estimates and are scrambling to reduce costs. As this cycle occurs, typically hiring freezes are implemented and it's not unheard of that merit increases get frozen as well at the end of the year. If one believes that the global economy will pick back up and help revenues recover, then this isn't something to worry about – however if the opposite is true, then cost cuts will continue to intensify and we could be in for more dismal and “unexpectedly light” earnings and jobs numbers in the future.

…read more

Source: Morgan Stanley Asked Analysts How Companies Were "Exceeding Estimates", The Answer Is Disturbing

    

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Posted June 11th, 2016 in Uncategorized.

Pictet: "The Pricing And Valuation Of Bonds No Longer Reflects Fundamentals" – Why This Matters

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By Tyler Durden

Another day, another confirmation of what fringe, tinfoil blogs have been saying all along: there are no more “markets”; there are merely policy tools created and manipulated by central banks to create the impression of stability, and keep asset prices artificially high. This week this was confirmed by yet another “non-fringe” voice, that of Christophe Donay, Head of Asset Allocation and Macroeconomic Research at Pictet, one of the largest Swiss private banks, who however posits his observation of broken markets into a philosophical question: in the hundred year-old debate between Wicksellians and Fisherians, who will end up being proven right.

Wicksellians believe that in today’s climate, where markets are being swamped with money pumped in by central banks via QE, long-term sovereign bond yields need to rise steeply to revert to their ‘natural’ rate of interest. An unexpected spike in inflation might be the trigger for this upward movement. According to proponents of this scenario, bonds would then be sent crashing, as they were in 1994. Conversely, the Fisherian camp believes that low government bond yields essentially reflect the anaemic state of the economy and that, as a result, central banks will do their utmost to ensure interest rates stay low to ward off any relapse into recession. Wicksellians are duly offloading their positions in government bonds, whereas Fisherians are building up theirs.

Aside from bond prices what else will determine which of these two core economists is right? According to Donay, “In the near term, a hike of 25 basis points in the Fed’s official rates over the summer, coupled with accelerating US growth, could lead to an increase in US long-bond yields. As such, 10- year Treasuries present an asymmetrical risk for investors. If this risk were to turn to reality, we might be able to conclude that the Wicksellians were right after all.” However, “if a recession were to occur in the US as interest rates moved back towards their ‘natural’ levels and if the Fed were to expend less effort trying to prevent it, we could declare that the Fisherians were right.”

In either case, one of these two dominant theoretical economic schools of thought will soon be cast away on the trash heap of failed economic through. We can only hope that in doing so, the economic consequences won’t be too devastating for the non-theoretical, real world.

From his full note:

Wicksell or Fisher: a century on, who is going to be right?

Central banks have been intervening wholesale on financial markets since 2008. Where is all this interventionism leading? Two economists from the last century could provide some pointers, however disconcerting. The extension by the European Central Bank (ECB) of its quantitate easing (QE) programme from sovereign bond purchases to corporate bonds in June offers the most recent evidence of the interventionism of central banks, following on from the QE programmes implemented by the US Federal Reserve between 2008 and 2013 and by the Bank of Japan (BoJ) since 2013.

These large-scale interventions have resulted in disruption of …read more

Source: Pictet: "The Pricing And Valuation Of Bonds No Longer Reflects Fundamentals" – Why This Matters

    

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Posted June 11th, 2016 in Uncategorized.

It’s Time To Blame Obamacare For Losing So Many Full-Time Jobs

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By Tyler Durden

Submitted by Edward Morrissey via The Fiscal Times,

Had a sinking feeling about the economy of late? It may not be your imagination. Economic indicators have flashed yellow for much of 2016, and the latest jobs report shows further depletion of the work force and a dearth of job creation. That trend, says one major bank, may be attributable to President Barack Obama’s signature legislation.

Last Friday, the Bureau of Labor Statistics (BLS) released the worst jobs report in almost six years. The US economy only added 38,000 jobs, less than a tenth of the estimated 458,000 Americans who left the workforce. In fact, thanks to revisions made to the March and April reports, that exceeds the number of jobs created in the past three months (348,000) by more than 100,000. The workforce participation rate dropped back to 62.6 percent, near a 40-year low, and more than three full points below its level at the start of the recovery in June 2009 (65.7 percent).

To call this a wide miss is an understatement. Economists had predicted a moderate jobs gain, with Reuters forecast. The unemployment rate dropped to 4.7 percent, but analysts widely noted that this was a result of the large exodus from the workforce. That included an increase of 130,000 among those who have left the workforce but still desire employment, outnumbering the jobs added in May.

The news on jobs might possibly be worse than even this indicates. An economist at Johns Hopkins called into question the seasonal adjustment calculations used by the BLS. Jonathan Wright recalculated the data and concluded that the economy had lost 4,000 jobs. Instead of a three-month average jobs gain of 116,000 – well below the 131,000-jobs-added level needed to keep up with population growth at a workforce participation rate of 62.6 percent — the three-month average was actually 107,000, and 114,000 for all of 2016.

On top of that, the second estimate of first-quarter GDP growth came in at an annualized rate of 0.8 percent, just short of contraction. The jobs market and the economy have both stalled. We have not experienced annual GDP growth above 2.5 percent in any year since recovery began in June 2009, making this the weakest recovery in the post-war period.

One data point in particular might give at least some indication why. The number of part-time workers in jobs for economic reasons shot up by 468,000, apart from the 458,000 that left the workforce altogether. Slack work or business conditions accounted for 181,000 of these jobs, while another 77,000 could only find part-time work.

Analysts at Goldman Sachs have noticed this trend for some time, and put the blame on Obamacare.

“The evidence suggests that the [Affordable Care Act] has at least modestly elevated involuntary part-time employment,” Goldman Sachs economist Alec Philips wrote in a research note published on Wednesday. Obamacare had the greatest impact on industries that traditionally do not offer strong health insurance coverage, such as retail stores and the hospitality industry. Phillips …read more

Source: It’s Time To Blame Obamacare For Losing So Many Full-Time Jobs

    

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Posted June 11th, 2016 in Uncategorized.

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