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posted on 02 March 2016

Early Headlines: Asia Stocks Soar, Oil Down, Super Rich Numbers Dwindle, Trump, Clinton Win 7 Of 11, Corp. Earnings Fraud, No EU Inflation, China Credit Downgraded, Short The Yen? And More

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Early Bird Headlines 02 March 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

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Global

  • Asia mostly higher with Nikkei leading the pack (CNBC) Asian markets rose Wednesday, with Japan's Nikkei 225 index leading the way after a strong finish on Wall Street overnight. The Japanese benchmark index was up 4.26%, with the yen hovering near the 114 handle against the dollar, after falling overnight. The dollar/yen pair traded at 113.90 as of 1:34 p.m. HK/SIN time. The Shanghai Composite Index also raced ahead by more than 4%.

  • Knight Frank Wealth Report 2016: The world's super-rich population shrank last year (City A.M.) The world's population of super rich shrank by three per cent last year as a more volatile financial climate and the continued fall in oil prices dented their wealth. Knight Frank's Wealth Report released today found that there were 187,500 high net worth individuals (UHNWI) - those with $30m assets or more - at the end of 2015, with a combined wealth of $19.3 trillion. And while the number of ultra-wealthy is set to rise by 41% to 263,500 by 2025, this is significantly slower than the last decade, when the population grew by 61%. Almost 6,000 people dropped out of the $30m-plus bracket last year, as global economic slowed and growth in equity, commodity and other asset prices also decelerated.

U.S.

  • Super Tuesday Results (The New York Times) Trump and Clinton maintained their leads, each winning 7 of the 10 states voting. But the 4 states won by Bernie Sanders was one short of the number that fivethirtyeight had identified as necessary to keep the path to nomination open for him, The fifth state, Massachusetts, went to Clinton by a razor thin margin.

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  • The Real Reason Stocks Exploded (Rick Ackerman, Rick's Picks) RA has contributed to GEI. Here are three excerpts from his daily email from Tuesday evening:

We were out with a prediction of a 600-point Dow rally Monday night, so yesterday's 349-point down payment was hardly a surprise. Even so, some will shake their heads in disbelief, unable to comprehend how huge rallies can occur for no good reason. This one, like so many others, was ginned up by cheats and con-artists on Wall Street who found support in phony economic news concocted by bureaucratic liars and hyped by a mainstream media whose understanding of basic economics is fourth-grade.

ZeroHedge culled two headlines that explained the whole thing: Wall Street Gains as Weak Data Sours Stimulus Hopes; and, Wall Street Surges as Data Points to Economic Recovery. It's difficult to imagine these headlines appearing on the same day, but they did. No matter. On Wall Street, and in the editorial rooms, ALL news is bullish, and when the headlines flatly contradict each other, that is hardly reason for concern or doubt.

To those who would jump in the path of this rally and short it just to show Mr. Market who's boss, here's an insightful ZeroHedge post from one Conrad Dobler to think about while you cool down: Stop thinking your bearish bets have to be right NOW! Timing is a giant bitch and yes things are terrible, awful, manipulated, bubblish to the extreme but no one knows where the break point is. Being early is being wrong, being late is being wrong in terms of the market.

  • The Great Corporate Earnings Fraud (James Quinn, The Burning Platform) JQ has contributed to GEI. This author has a 'dynamic' style which makes for a page-turning read. Bottom line, he attacks corporate management for acting like pirates of the markets, extracting every last penny they can to enhance their own compensation and leaving little behind for posterity. He points out that, even as earnings logged with proper accounting have fallen for two years (first graph below), stock buybacks have continued to increase with obvious chicanery since earnings are lower (second graph below).

EU

  • Not Even Secondary Inflation (TalkMarkets) The preliminary, national indications Friday for European inflation were at least 0.0% if not worse for February, and this morning's update for the whole Eurozone kept to that expectation. The official HICP figure was -0.2%, worse than even more pessimistic predictions. That, however, was the least of the concerns as even stripping out the renewed petroleum "deflation" Eurozone inflation on the secondary level is faltering.

UK

  • Why the Swiss model would be a poor choice for Britain post-Brexit (City A.M.) A former president of the Swiss Confederation comments on the suggestions made by some campaigners that the UK might be able to achieve a "Swiss deal" with the European Union, and points out some important facts about the reality of the Swiss-EU relationship. Currently, as a member of the EU, the UK has full access to the Single Market. This means trading rights for British firms with no tariffs and a voice when regulations are determined. Switzerland, by contrast, only has partial access to the EU's Single Market, and crucially services, which make up 78% of the UK economy, are covered only to a limited extent by the "Swiss model".

Saudi Arabia

  • Shale Oil Isn't Saudi Arabia's Only Nemesis (Bloomberg) Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary. It won't be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: Even when overproduction ends, a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years. The market will not sustain higher prices until there is an inventory draw down - just balancing production with consumption will not do the trick.

Japan

  • It's Safe To Sell Short The Yen Again (TalkMarkets) Triggered by the Bank of Japan's shocking move to negative interest rates (NIRP), the yen has been driven by a massive unwind of hedge fund positions in everything around the world that were all financed by short yen positions. The author thinks the strong bull move in the yen is over (10% rise in NYSE:FXY since early December). That produced a rise in the yen from about 123 to the dollar to about 112, a monumental move for less than two months.

China

  • Moody's cuts China's credit rating to "negative" from "stable" (City A.M.) Moody's cut its outlook for China from "stable" to "negative", citing the country's rising debt burden and uncertainty over the government's ability to implement the much needed economic reforms. The world's second largest economy is transitioning to a "new normal" of lower growth, driven by domestic consumption instead of credit-fueled investment.

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