The Mess That Greenspan Made - Part 40

Q3 GDP Now Slips to 0.7% Rate

From the Atlanta Fed’s GDP Now forecasting tool comes news that the U.S. economy is again slowing (in reading the accompanying note, it’s clear they didn’t get the memo about what impact data collection/reporting adjustments are supposed to have).

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 0.7 percent on August 13, down from 0.9 percent on August 6. The previously reported nowcast of 1.0 percent for August 6 was revised down due to a minor adjustment in the method for nowcasting investment in computers and peripherals. Since a week ago, the nowcast for the contribution of inventory investment to third-quarter real GDP growth has declined from -1.8 percentage points to -2.2 percentage points. This decline more than offset an increase in the nowcast of the third-quarter growth rate in real consumer spending from 2.9 percent to 3.1 percent after the release of this morning’s retail sales report from the U.S. Census Bureau.

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Thursday Morning Links

MUST READS
China allows yuan currency to drop for third day – BBC
China Adds a Chainsaw to Its Juggling Act – Bloomberg
China central bank tries to soothe global markets – Reuters
PBOC vows continuity, stability in monetary policy – China Daily
China cannot risk the global chaos of currency devaluation – Telegraph
Currency war? Investors playing a dangerous game with Beijing – FP
Devaluation Hints at China’s Rising Distress Over Economy – NY Times
Cashin: These are the Street’s real China concerns – CNBC
The Syriza effect? Greek economy ‘grows’ by 0.8pc in second quarter – Telegraph
Memorandum of understanding: what exactly has Greece signed up for? – Guardian
Busted: The Liberal Claim You’re Too Stupid To Make Health Care Decisions – Forbes
California Must Get Serious About the Nation’s Worst Roads – RCM

MARKETS/INVESTING
World stocks rebound as China soothes yuan weakness fears – AP
Wall Street’s wild swings all about China – USA Today
Brent crude reclaims $50 as China fears ease – MarketWatch
European Stocks Rise as China’s Third Devaluation Seems the Last for Now – The Street
Who’s Crazy Now? Yuan Bears Vindicated by Tumble See More Pain – Bloomberg
Ask Matt: What can kill the bull market? – USA Today
Gold dips as worries over China’s yuan devaluation ease – Reuters
Massive buying of gold stocks as fear trade returns – Mining.com
Everyone from Putin to ordinary savers are stockpiling gold – Telegraph
Silver Cycle Low – NOW – GoldSilverWorlds

ECONOMY/WORLD/HOUSING/BANKING
What Would It Take for the Prime U.S. Workforce to Fully Recover? – dshort
U.S. CEOs Who Make the Most Money Compared to their Workers – Bloomberg
Eurozone economic recovery likely stalled in Q2 – AP
Maybe China Doesn’t Have a Master Plan – Bloomberg
Yuan slide ‘could cool Australian housing market’ – SBS
Japan Can Offset China Yuan Move by Easing, Says Abe Adviser – Bloomberg
Despite oil slump, Houston housing market breaks record – bizjournal
Surge in Commercial Real-Estate Prices Stirs Bubble Worries – WSJ
The Fed Is on Thinner Ice Than It Realizes – Bloomberg
Soft Patch Might Ground the Fed’s Liftoff – RCM

 

China and the Fed

The Federal Reserve brain trust must be rolling their eyes at the latest market turmoil resulting from China’s currency devaluation – first Greece, now China.

Keen on notching that first rate increase in about a decade, lest they be accused of leaving rates “too low for too long” again amid more “Fed-bubble machine” accusations, they are now growing more fearful of repeating the European Central Bank’s 2011 error when they raised short-term rates on nascent signs of inflation, only to reverse course months later.

Here’s Art Cashin’s take on the situation:

There’s nothing worse than a central bank that makes a bad situation worse and the trade-off here is whether the Fed’s action or inaction results in a near-term market crash or bigger asset bubbles later. My guess is that it will be the former combination.

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Wednesday Morning Links

MUST READS
China’s currency falls for a second day – BBC
China woes complicate Fed rate plans – USA Today
And the Bloodletting Begins… – Capitalist Exploits
Currency Move by China Clouds Its Policy Goals – NY Times
YChina’s Free-Market Resolve Tested as PBOC Intervenes – Bloomberg
What China’s Devaluation Means to the U.S. Economy – Wall St. on Parade
China’s Currency Devaluation: Fodder For Gold Bulls? – Barron’s
SocGen: Prepare for overwhelming ‘waves of deflation’ – Business Insider
Donald Trump slams Beijing for crashing the yuan – CNN/Money
Can Donald Trump win? John Oliver vs. Anderson Cooper – The Week
Bernie Sanders surges ahead of Hillary Clinton in N.H. – Boston Herald
Asset-Price Inflation Enters Its Dangerous Late Phase – Mises

MARKETS/INVESTING
Global market sell-off intensifies – AP
OPEC just kicked oil into the $30s – CNBC
Dow’s Wild Swings Are Giving Traders a Headache – Bloomberg
Global stocks sink as China’s yuan falls for second day – USA Today
Until It Institutes Reforms, China’s Markets Will Be Deformed – RCM
Gold hits 3-week top on lower dollar, shares after China devaluation – Reuters
Why Silver Coin Premiums Rise Amid A Falling Silver Price – GoldSilverWorlds
Why Chinese devaluation is a magic catalyst for the gold price – Arabian Money
Chinese fears send gold price to 3-week high – Mining.com
Chinese gold production surges – Mineweb

ECONOMY/WORLD/HOUSING/BANKING
Competitiveness and Class Warfare – Krugman, NY Times
Sputtering Worker Productivity Vexes Economy – WSJ
Why China may be on the brink of recession – MarketWatch
Moody’s cuts Brazil rating but says investment grade is safe – Reuters
Brazil’s Political Crisis Has Created A Bottomless Pit For Economy – Forbes
Greek debt sustainability: The devil is in the tails – voxeu
Home Prices Soar in Some Metro Areas – WSJ
Cashin: 2015 hike is still out of the question – CNBC
How Much More Faith In Central Banks Is Left? – Zero Hedge
Will the Fed Delay Rate Hike After China Shock? – Barron’s

 

China Acts

China’s relatively modest currency devaluation appears to be the top news story of the day and, so far, equity markets are not taking it well – here’s why they did it.

Precious metals investors, on the other hand, have embraced the news since, like the Swiss bank action to remove the euro-peg from the franc some time ago, it comes across as one more sign that the global currency regime has an expiration date.

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