Posts by Aaron Task
- Daily Ticker1 day ago
The U.S. economy added 175,000 jobs in February, alleviating concerns -- at least for the moment -- about the labor market after disappointing results in December and January.
Beyond the upside surprise on payrolls, featuring 162,000 private sector jobs and upward revisions totaling 25,000 for the prior two months, other notable datapoints in the report include:
Overall, "it's a mixed report," according to Greenhouse. "The labor market is still pretty weak. It's not clear workers will have the leverage, the bargaining power to seek a job across the street that might pay 5% or 10% that might put pressure on one's employer to give a good raise."
- Daily Ticker2 days ago
Until recently, few investors outside China had ever heard of Shanghai Chaori Solar Energy Science & Technology Co. But the maker of solar cells is now the talk of the global financial community amid fears it could be the proverbial butterfly whose flapping wings cause an earthquake in China's $1.4 trillion credit market. Last week, Shanghai Chaori Solar said it was unlikely to be able to make a roughly $14.7 million debt payment by Friday's deadline, putting it on track to be the first corporate borrower to default in China. “We doubt that the financial system in China will experience a liquidity crunch immediately because of this default but we think the chain reaction will probably start,” write Bank of America strategists David Cui, Tracy Tian and Katherine Tai, suggesting this event could prove to be a "Bear Stearns moment" for China. In the summer of 2007, two internal Bear Stearns hedge funds collapsed due to bad bets on subprime mortgage-backed securities. Their failure was a harbinger of both the end of the credit boom and the ultimate collapse of Bear Stearns itself, which was consumed by J.P. Morgan (JPM) in March 2008 in a deal facilitated by the Federal Reserve. At the time, many thought the "rescue" of Bear Stearns signaled the end of the crisis and financial markets rallied; but Bears' demise was merely a prelude to the collapse of Lehman Brothers in September 2008, and the financial chaos which resulted. To be sure, Bank of America's (BAC) strategists aren't the first -- nor likely the last -- to warn that China's debt boom is going to end badly. Last summer, Fitch analyst Charlene Chu generated headlines by warning about China's overall debt market, specifically its wealth products. From 2008 to 2013, China's debt-to-GDP levels jumped 75 basis points to 200% vs. a 40 basis point rise in the U.S. in the five years ending 2007, Chu noted, prompting her to warn: "This is beyond anything we have ever seen before in a large economy. We don't know how this will play out. The next six months will be crucial." Again, that was roughly 10 months ago, suggesting today's warnings about Shanghai Chaori Solar missing a $14.7 million debt payment should be taken with a grain of salt, especially given the context that China's corporate bond market is $1.4 trillion and the nation's foreign currency reserves topped $3.8 trillion in December. "I think people underestimate the scale of things that happen in China," says Dan Colarusso, executive editor of Reuters Digital. "The real 'Bear Stearns moment', if there is going to be one -- and it's a frightening specter -- is if [a default] happens in a consumer-lending area like real estate or a bank where hot money flows through quickly." Unlike consumer-based firms, where a lot of so-called shadow banking occurs, Shanghai Chaori Solar operates in a regulated industry that is not dissimilar to the U.S. utility industry, he notes. "Maybe the government feels
- Daily Ticker3 days ago
Europe is "clearly moving in the right direction - the glass is at least half-full." That, at least, is the view of European Central Bank President Mario Draghi, who issued those comments in Brussels this week ahead of the ECB's policy meeting on Thursday. This week's ECB-speak would seem to be an upgrade from Draghi's statement on Feb. 27 when he said: “We will remain alert as to whether any indication on further downside risks to price stability emerge and we stand ready to act.” The recent drama in Ukraine, as well as data showing eurozone inflation rose a higher-than-expected 0.8% in February, have further complicated economists' efforts to predict what the ECB will -- and won't -- do at Thursday's meeting. About one-third of economists surveyed by Reuters expect the ECB to cut its key repo rate from its current 25 basis points, while Bloomberg's survey showed only 25% expecting a move. But there is more the central bank can do, Marc Chandler, global head of currency strategy at Brown Brothers Harriman says in the accompanying video, including:
- Daily Ticker4 days ago
Updated from 12pm ET
Financial markets were back in 'risk-on' mode Tuesday after Vladimir Putin blinked. "We aren't going to fight the Ukrainian people," Putin said Tuesday after ordering Russian troops participating in so-called military exercises near the Ukrainian border back to their bases. “The use of the military is an extreme case.” In reaction, global markets reversed Monday's action with stocks rallying while "safety trades" like gold, the dollar and U.S. Treasuries weakened and crude gave back much of Monday's 2.2% gain. Update: The Dow gained 226 points Tuesday, recouping all of Monday's declines -- and then some. The S&P 500 climbed 1.5% to a new all-time at 1873.91 while the Nasdaq jumped 1.7% and Russell 2000 surged 3%.
Putin's first public comments since ousted Ukrainian President Viktor Yanukovych took refuge in Russia also featured the following, according to various reports:
- Daily Ticker5 days ago
With the crisis in the Ukraine roiling global markets, some good news about the state of the U.S. economy slipped by largely unnoticed: Personal income rose 0.3% while consumer spending gained 0.4%, both ahead of expectations. Separately, the ISM manufacturing for February was above expectations while Markit's measure of U.S. manufacturing activity hit its highest level since May 2010. It's a welcome bit of good news for the U.S. economy, which has shown signs of flagging since late 2013. A raft of disappointing data on GDP, jobs, retail sales and consumer confidence, as well as a slowdown in the housing recovery, has a least one econo-bull turning more pessimistic.
- Daily Ticker8 days ago
Bitcoin's future was called into question this week due to the collapse of Mt. Gox, which filed for bankruptcy in Japan on Friday. Once one of the largest exchanges for the virtual currency, Mt. Gox was the victim of either a security flaw or an inside job -- or a combination of both. Whatever the cause, nearly $500 million worth of bitcoins have disappeared into the virtual ether, leaving clients of Mt. Gox with little or no recourse to recoup their losses. That's because bitcoin, by design, is beyond any government control or regulatory oversight. "Bitcoin is a payment innovation that’s taking place outside the banking industry," Federal Reserve chair Janet Yellen said Thursday during her Senate testimony. "So the Fed doesn’t have authority to supervise or regulate Bitcoin in any way.” Other regulators, both in the U.S. and abroad, have drawn similar conclusions; in the past, such statements have caused temporary fluctuations in bitcoin prices but generally cheered its libertarian advocates. But the crypto-currency's biggest draw for its supporters -- its lack of government oversight -- could now prove to be its undoing, or at least prevent it from going mainstream. Consumers who may have been curious about bitcoin before this week are now going to be very wary about making transactions or investments in the virtual currency. If a U.S. bank fails, deposits of up to $250,000 are guaranteed by the U.S. government via the Federal Deposit Insurance Corp. If a brokerage firm like MF Global fails, clients can turn to the Securities Investor Protection Corp., which is funded by its members and aims to protect each customer account for up to $500,000. Again, nearly $500 million of bitcoin assets were lost due to Mt. Gox's collapse and its former clients have virtually no options -- no regulator nor law enforcement agency -- to turn to in the hopes of getting their money back. At this moment, it seems clear bitcoin needs some kind of regulation to protect consumers, or it will remain at best a fringe way to conduct transactions and, at worst, a venue that continues to attract shysters and criminals. "At least for now, more government involvement is needed to prevent further failures of bitcoin exchanges," writes Ezra Galston, a venture capitalist with Chicago Ventures, who continues:
- Daily Ticker9 days ago
The Mobile Word Congress (MWC) wraps up in Barcelona today and the conventional wisdom is the confab was great for Google (GOOG) and not so good for Apple (AAPL). Indeed, hordes of new Android phones were announced, including the first-ever by Nokia and the latest high-end phone from Samsung. Meanwhile, Apple -- which doesn't participate in MWC -- was an afterthought. In addition, IDC is forecasting a sharp slowdown in smartphone sales growth -- from 39% in 2013 to 19% this year and continuing to decline to 6% in 2018. IDC further predicts average selling prices will drop from $335 in 2013 to $260 in 2018, a potentially ominous portent for Apple, which seems hellbent on maintaing its "premium" brand status.
- Daily Ticker12 days ago
The past week has not been pretty for the housing market as data showed a sharp deceleration, calling the recovery into question. Among the lowlights:
In addition, permits fell more than expected and The NAHB home builder index fell 10 points. Beyond the weather, the housing market is battling the “ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates,” according to the National Association of Realtors -- an organization not typically known for being cautious on housing. (Update: The December S&P Case-Shiller 20-City Index, released after the accompanying video was taped, rose a higher-than-expected 13.4% vs. a year ago. But the index rose just 0.8% vs. the prior month, the third-straight month of deceleration.)
- Daily Ticker15 days ago
The Gap Inc. (GPS) put a new twist on the minimum wage debate this week, announcing plans to pay its roughly 65,000 workers at least $10 per hour starting next year. "This happens all the time -- lots of people earn more than the minimum wage," say Edward Conard, a former managing director at Bain Capital and author of Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong . "You saw that in 2007 when the labor market heated up. Places like McDonalds...were paying more than the minimum wage in order to lure workers. I think we could see that and companies that pay minimum wage experiment with higher paid workforces."
- Daily Ticker16 days ago
The debate over income inequality has taken on a new twist in recent weeks: The 1% are mad as hell and they're not going to take it anymore. Most notably, legendary venture capitalist Tom Perkins compared "the progressive war on the American one percent" to Nazi Germany in The WSJ. Real estate magnate Sam Zell agreed, telling Bloomberg TV “the 1% are being pummeled because it’s politically convenient to do so.” Separately, Nicole Miller CEO Bud Konheim said on CNBC that Americans making $35,000 a year should stop complaining because they're much better off than people in India and China. "We've got a country that the poverty level is wealth in 99 percent of the rest of the world," he said. "So we're talking about woe is me, woe is us, woe is this." Related:Income inequality explosion: Top 85 = Bottom 3.5 billion