NEW$ & VIEW$ (12 FEBRUARY 2013)

Chain store sales collapsing. Sequester. Home prices rise, inventories drop. NFIB charts. Europe: don’t celebrate just yet. France IP collapses. ECB. OPEC. Inflation watch. Low corporate taxes denounced, addressed. Insider selling.

Surprised smile  WEEKLY CHAIN STORE SALES COLLAPSING

The fiscal drag seems to be biting hard!!! This is up to Feb. 9. Anecdotally, here in South Florida, traffic is light, restaurants are not busy and stores are on sale.

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Hmmm…Careful out there!

A Cliff Congress May Go Over

As Congress comes up on the latest budget deadline, lawmakers seem less daunted by the prospect of going over the “cliff,” as partisan positions remain far apart with three weeks remaining before big cuts hit.

March 1 is the day when $85 billion in cuts, known as the “sequester” in Washington parlance, begin to take effect in defense and domestic programs unless Congress acts. But the consequences of inaction are less clear than they were when Congress stared at the original “fiscal cliff,” the Jan. 1 series of tax increases and spending cuts that neither Democrats nor Republicans wanted for fear of stunting growth and burdening millions of taxpayers.

Despite warnings about the threat to military readiness, education programs and activities across the government, both parties say that it is likely the deadline will pass without a compromise being reached and that the spending cuts will take effect at least temporarily.

Home Prices Rise in 88% of U.S. Cities as Recovery Gains  Prices for single-family homes climbed in almost 88 percent of U.S. cities in the fourth quarter as the housing recovery broadened.

imageThe median sales price rose from a year earlier in 133 of 152 metropolitan areas measured, the National Association of Realtors said in a report today. In the third quarter, 120 areas had gains.

Pointing up  At the end of the fourth quarter, 1.82 million previously owned homes were available for sale, 22 percent fewer than a year earlier, according to the Chicago-based Realtors group. (Chart from ISI)

Storm cloud  National Federation of Small Business

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Gideon Rachman: Rare good news for Europe

(…) So is this the beginning of the great European bounceback?

Naturally, it is more complicated than that. What has happened in recent months is that the threat of a real disaster in Europe – such as a big bank failure or the break-up of the euro – has receded. As a result, investors are more confident. That, in turn, is helping to breathe life into the real economy. This is what Mario Draghi, the president of the European Central Bank, has described as “positive contagion”. But pessimists need not despair. There is still plenty that could go wrong. (…)

Such as:

The French industrial sector suffered the steepest decline in output since the height of the financial crisis, official data for the end of last year indicated. The data confirm the message from gloomy business surveys
which also suggest that the sector’s downturn persisted, and possibly steepened, at the start of 2013.

imageIndustrial production fell 1.8% in the final three months of last year compared to the previous three months, led by a 2.5% drop in manufacturing output. In both cases, the quarterly contractions were the steepest seen since the height of the financial crisis in early-2009.

imageThe largest deterioration was seen in the autos sector, where output fell 10.1% in the fourth quarter, its largest decline since the first quarter of 2009. However, the decline was by no means limited to the poor performing car industry. Production of electronic and electrical goods and basic metal goods also endured the sharpest contractions of output since early-2009. (…)

Worryingly, although the official data showed a 0.1 monthly increase in manufacturing output in December, the PMI remained firmly in contraction territory in January, suggesting the sector continued to act as a severe drag on the economy.

Barclays said it would slash several thousand jobs as part of a three-year effort to rebuild the bank’s tattered reputation and ready it for a tougher regulatory environment.

Under Chief Executive Antony Jenkins’ new plan for the lender, around 3,700 jobs will go, mostly in its investment bank, as it aims to slice around 9% from its £18.5 billion cost base by 2015.

With two weeks to go until Italy votes, investors might be beginning to sweat. They should be cautious on Italian assets.

(…) A coalition involving Prime Minister Mario Monti still seems to be the most likely outcome, offering some assurance of continued reform in Italy. But the center-right coalition led by Silvio Berlusconi’s party has won ground with populist promises, Mr. Monti himself has failed to gain traction, and there is now a blackout on opinion polls. (…)

True, the center-left coalition led by Pier Luigi Bersani’s Democratic Party, which is most likely to ally with Mr. Monti, remains in front, but its support has slipped to 35% from 38% between the second week of January and the first week of February, based on an average of polls, UniCredit UCG.MI +0.69% notes. Meanwhile, the center-right vote has risen to 29% from 26%. Academic research suggests polls may underreport support for the center-right.

Complicating matters is the Five Star movement led by Beppe Grillo, an antiestablishment movement that is polling as the third-most-popular party with about 16%, but which is unlikely to play a role in any coalition. (…)

  • And this:
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  • And that:
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Just kidding Punch Hot smile G7 intervenes to defuse currency tensions
Largest economies say they will not target exchange rates

(…) “We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” the ministers and governors said. (…) Sleepy smile Sleepy smile Sleepy smile

ECB May Offset Banks’ Loan Paybacks to Preserve Liquidity

Banks have pledged to return 145.6 billion euros ($195 billion) of the initial 489 billion euros of three-year funds, leaving about 510 billion euros of excess liquidity, according to analysts at JPMorgan Chase & Co. ECB President Mario Draghi said last week he expects at least 200 billion euros to remain outstanding, suggesting a bigger return of funds would prompt renewed efforts to ease monetary conditions. (…)

Pointing up An index compiled by Rabobank, based on European Commission data, shows monetary conditions tightened in the three months through the end of January at the fastest pace since the euro began in 1999, McGuire said.

“We will closely monitor conditions in the money market and their potential impact on the stance of monetary policy, which will remain accommodative with the full-allotment mode of liquidity provision,” Draghi told reporters at a press conference on Feb. 7 after the central bank held its key interest rate at 0.75 percent. “When we estimate repayment for the second LTRO, we are left quite persuaded that the excess liquidity will be well over 200 billion euros, confirming the monetary policy stance as being accommodative.” (…)

OPEC Boosts Estimated Demand for Its Own Crude Oil  OPEC raised forecasts for the amount of crude it will need to supply this year because of stronger fuel demand in emerging economies.

The Organization of Petroleum Exporting Countries will have to provide an average of 29.8 million barrels a day in 2013, or 100,000 a day more than it estimated a month ago. The producer group’s output in January was 500,000 barrels a day larger than this, at 30.3 million, according to OPEC’s monthly market report published today.

Global oil demand will increase by 800,000 barrels a day, or 0.9 percent, to 89.7 million a day, OPEC said. That marks an increase of 80,000 barrels a day from last month’s report. China will account for 400,000 barrels a day of this year’s growth.

Saudi Arabia, the group’s biggest member and de facto leader, curtailed supplies by 75,800 barrels a day in January to 9.1 million a day.

INFLATION WATCH

Pointing up  Price pressures seem to be intensifying. To be monitored.

Britain’s inflation rate unexpectedly held steady for the fourth consecutive month in January but there was little respite for consumers as it remained at its highest level since May, official data showed on Tuesday.

Annual consumer price inflation stayed at 2.7 percent last month, the Office for National Statistics said.

The ONS also said house prices rose 3.3 percent on the year in December – the largest increase since November 2010. In November 2012 they rose 2.2 percent.

Production at factories, utilities and mines fell 0.6 percent from a year earlier, compared with a revised 0.8 percent drop in November, the Central Statistical Office said in a statement in New Delhi today.

Manufacturing dropped 0.7 percent in December from a year earlier, while capital goods output decreased 0.9 percent, today’s data showed. Mining fell 4 percent while electricity output increased 5.2 percent.

India’s elevated inflation of more than 7 percent has limited the extent its central bank can cut interest rates to boost demand, while an uneven global recovery has hurt exports.

Consumer prices rose 10.79 percent in January from a year earlier, a report showed today. That’s the fastest in the BRIC group, which also includes Brazil, Russia and China.

Indonesia kept its benchmark interest rate unchanged for a 12th meeting as a depreciating currency and inflationary pressures reduce scope for an addition of monetary stimulus to spur a slowing economy.

Southeast Asia’s largest economy is facing rising price pressures from higher power tariffs, an increase in minimum wages and as a weakening rupiah raises the cost of imported goods. At the same time, the economy grew at the slowest pace in more than two years last quarter as an export slump countered gains in domestic consumption.

Russia’s central bank refrained from easing borrowing costs after inflation surged to a 15-month high, warning of the threat of faster price growth and defying government calls for lower rates to support the slowing economy.

Consumer prices rose 7.1 percent in January from a year earlier, which was higher than all 21 forecasts in a Bloomberg survey. Inflation may accelerate to 7.3 percent to 7.4 percent in February from a year earlier, the Economy Ministry said in a report yesterday.

PROFIT MARGINS

Light bulb  One reason profit margins are so high is being attacked by governments. Corporate profits must be normalized.

Corporate Tax Maneuvers Pose Risk to Fairness, OECD Says
 

Multinational corporations’ use of aggressive tax planning to shift profits to low-tax countries poses a serious risk to fairness and tax revenue, according to the Organization for Economic Cooperation and Development.

Tax systems haven’t kept pace with changes in how companies do business, allowing corporations to book their profits from intellectual property in jurisdictions without income taxes even though their customers are in developed countries with corporate levies, the OECD said in a report being released today in Paris.

“What is at stake is the integrity of the corporate income tax,” said the report. Failing to respond, it says, would create “unintended competitive advantages compared with enterprises that operate mostly at the domestic level.”

The report called for coordinated action by governments to plug gaps between their tax systems, and it said there is an “urgent need” to solve the problem. Companies have urged countries to prevent double taxation of the same income by multiple jurisdictions while taking advantage of “double non- taxation,” situations where income is effectively taxed nowhere, according to the report.

 

High five  Six Equity Offerings Price After The Close As Insiders Rush To Sell To Retail

Just in case the Friday night insider dump bomb by Google executive chairman Eric Schmidt, in which he announced the sale of 42% of his GOOG holdings the day the stock hit its all time high, did not send a clear enough message to the market as to what side of the underover valued spectrum corporate insiders believe we currently find ourselves in, here come six other companies with announcement of equity follow ons and secondary offerings – mostly by “selling shareholders” who happen to be some of the smartest LBO shops around – after the close on Monday alone. The scramble to sell equity while the selling is good is on.

 

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