Cheating, No Problem: Automakers Win Again in Europe

They run the show.
Brussels, Europe: A more wretched hive of corporate lobbyists, law firms, and money-grubbing apparatchiks you will struggle to find. The latest example of lobbying influence is one of the most egregious yet, since it will affect the quality (or lack thereof) of the air breathed by millions of Europeans for the foreseeable future.
Tough Talking
From September 1, 2017, new car models will have to pass a new emissions test before they can be put on the market. According to many headlines, the new tests are much tougher than the previous ones. ‘EU Car Emissions:Tough New Tests Backed,’ proclaims the BBC. ‘EU Parliament Takes ToughStance on Emissions Tests,’ thunders the trade journal Automotive News Europe.
The word ‘tough’ normally evokes the idea of strength or resolution, something that is not easily broken or made weaker or defeated. Not so in this case. In the EU’s ‘tough’ new tests, car models sold after September 2017 will not be allowed to ‘exceed nitrogen oxide emission levels by more than twice the technical limit,’ reports the BBC.
Put another way, cars will be allowed to spew out twice the legal limit of nitrogen oxides (NOx) – or as a matter of fact, more than that (110%) – until 2020, and by up to 50% more from then on. The EU has just dramatically raised the emission limit instead of lowering it. So much for toughness.
The really funny thing (in the classic ‘if you don’t laugh, you have to cry’ sort of way) is that the main purpose of the new rules is to regain public trust and confidence in Europe’s car industry.
‘Public trust and consumer protection are at stake,’ the European Union’s industrial policy chief, Elzbieta Bienkowska, told a business audience in Brussels on Oct. 22. ‘The only way in which we will restore public confidence is by acting quickly, collectively, coherently, and effectively. National authorities must play their role and work as active partners.’

This post was published at Wolf Street on October 31, 2015.

Everything You Know Is Wrong: The Boston Tea Party

What people call history is really myth. History is a tale told by bloody conquerors, failed novelists, and small town football coaches earning their keep in public schools. It’s a system of power. He who controls the past controls the future. He who controls the present controls the past. Court historians regard the myth as sacrosanct. They never question its veracity and are quick to deride anyone who voices doubt.
Americans spend their school years struggling to memorize names and dates. In the decades afterward, they take pride in the scattering of facts they manage to retain. So, of course, they get pretty upset when you show them most of those precious facts were lies.
But for those with an open mind, those last few willing to question anything and anyone, discovering the truth is exhilarating. Truth is what we’re after. We’ll chase it down whether it sets us free as Jesus said it would, or destroys us like Oedipus. In each installment of Everything You Know Is Wrong, I examine unquestioned facts – historic, scientific, social, and religious – to reveal the truth beneath the myth.
Postage stamps celebrate the Boston Tea Party as a popular uprising against oppression. Most Americans were taught it was a glorious protest against Britain’s high taxes on tea. The truth is a shocker, guaran-TEA-ed to prove that everything you think you know is wrong.
British tea originated in India. The tea trade was an enormous part of the East India company’s business. The British Crown granted the company a monopoly over trade with China and India. It was mercantilism, the use of the state to fulfill private objectives. This government interference soon resulted in artificially high tea prices.
Britain’s crony capitalism fueled a black market. John Hancock began smuggling Dutch tea into the colonies, a very profitable criminal enterprise for the Founding Father. Hancock became the wealthiest smuggler in America. Dutch tea was of an inferior quality to the British product, but it was much cheaper. Americans chose to buy cheap Dutch tea rather than the expensive, though superior, East Indies tea. Merchants in the colonies boycotted British tea.
In response to the five year boycott, Parliament cut the tax on East Indies tea in 1773. Duties were removed from tea arriving in Britain, so it could be sold in America at lower prices than smuggled Dutch tea. A monopoly on this cheap British tea was granted to certain merchants in the colonies.

This post was published at Lew Rockwell on October 31, 2015.

Global Deflation Alert: Emerging Market Credit Downgrades Are Soaring

Investors be warned. There have been more credit-rating downgrades in developing nations in the first nine months of this year than in the whole of 2014 and the outlook keeps getting gloomier, according to Standard & Poor’s.
An economic slowdown and lower commodity prices are to blame, said Diane Vazza, head of S&P’s Global Fixed Income Research Group, in a report Wednesday. S&P cut the ratings for 88 bonds sold by developing countries and companies in the third quarter, including Brazil, Zambia and Ecuador, while raising the grades for 22 securities. That brings the total number of downgrades to 224 this year, compared with the 206 cuts in 2014.
The ratings cuts will continue to overwhelm emerging markets in the coming months. As of Sept. 30, about 28 percent of companies in developing nations have a negative outlook or are on the watch list for potential downgrades, compared with 24 percent in the second quarter, the report showed.

This post was published at David Stockmans Contra Corner on October 30, 2015.

Campaign 2016 as a Demobilizing Spectacle

You may not know it, but you’re living in a futuristic science fiction novel. And that’s a fact. If you were to read about our American world in such a novel, you would be amazed by its strangeness. Since you exist right smack in the middle of it, it seems like normal life (Donald Trump and Ben Carson aside). But make no bones about it, so far this has been a bizarre American century.
Let me start with one of the odder moments we’ve lived through and give it the attention it’s always deserved. If you follow my train of thought and the history it leads us into, I guarantee you that you’ll end up back exactly where we are – in the midst of the strangest presidential campaign in our history.
To get a full frontal sense of what that means, however, let’s return to late September 2001. I’m sure you remember that moment, just over two weeks after those World Trade Center towers came down and part of the Pentagon was destroyed, leaving a jangled secretary of defense instructing his aides, ‘Go massive. Sweep it all up. Things related and not.’
I couldn’t resist sticking in that classic Donald Rumsfeld line, but I leave it to others to deal with Saddam Hussein, those fictional weapons of mass destruction, the invasion of Iraq, and everything that’s happened since, including the establishment of a terror ‘caliphate’ by a crew of Islamic extremists brought together in American military prison camps – all of which you wouldn’t believe if it were part of a sci-fi novel. The damn thing would make Planet of the Apeslook like outright realism.

This post was published at David Stockmans Contra Corner on Oct 30, 2015.

GDP Report Is Now Only About Tallying The Ongoing Cost

What should be written about GDP has nothing to do with whether 1.5% is meaningfully different than 3.9%. Everything gets focused upon the quarterly variations and, often intentionally, loses all that is important about the economic context. That 1.5% is weak and ineffectual, but that it continues the string of irregular and unstable approximations is all that truly matters; especially as GDP is the one account constructed most charitably toward delivering an optimistic number. With its heavy emphasis on imputations and trend-cycle subjectivity, the fact that GDP has continued on a conspicuously uneven track reveals everything we need to know about economic conditions.
That starts with, in my analysis, the great likelihood that the lumpy surge of the past two years (Q2 this year; Q2 & Q3 last year) are going to find thesame disappearance as the unevenness originally presented about 2012 and 2013. The instability more than suggests now as it did then, only the BEA refused to acknowledge that until forced by ‘unexpected’ benchmark revelations. That is the pertinent element of GDP as far as predicting, as much as it might, the future course of the US economy.
In truth, we don’t need to go that far in order to understand the current and immediate predicament. With all its imperfections, GDP delivers the unwelcome news in its past performance for anyone wishing to see it. The fact that so many dwell only in the current number has allowed this deficiency to protect and bolster the monetarist case that has so stunningly bombed. Worse, Ben Bernanke is trying to frame the results of GDP as ‘proof’ that his ‘courage’ rewarded all of us; it is highly disingenuous and worse, since if he is successful in convincing at least those politicians already in alignment to judge him and his monetary brand along these lines it will only further hinder actual recovery and long run economic health. That is the great reductionism of this age of less obvious inflation, where he should turn total disaster into shining success prevents recognizing and appreciating necessary changes.
As with the ‘dollar’ and money dealing, GDP actually proves the opposite of Bernanke’s case in every way imaginable. He plainly states his view as (from his October 4 WSJ op-ed):

This post was published at David Stockmans Contra Corner on October 30, 2015.

Monetary Madness In Motion – BOJ Balance Sheet Heading Toward 100% Of GDP

The Bank of Japan is packing the biggest bazooka when it comes to quantitative easing.
The acceleration in asset purchases championed by BOJ Governor Haruhiko Kuroda since April 2013 now means its 366.6 trillion yen ($3 trillion) stockpile is the equivalent of 69 percent of Japan’s gross domestic product, according to Martin Malone, global macro policy strategist at London-based brokerage Mint Partners Ltd.
That’s larger than the combined size of those of the Federal Reserve, European Central Bank and Bank of England, of which the Fed’s is biggest at 25 percent of GDP. Indeed, Malone reckons that the BOJ’s balance sheet will be double those of its counterparts when it tops 100 percent of GDP within two years.
Economists are divided on whether the BOJ will intensify its stimulus push Friday, when officials next convene. The bank already has a target of expanding the monetary base by 80 trillion yen a year, and 16 of 36 analystssurveyed by Bloomberg expect Kuroda and his colleagues to loosen policy further this week, while eight forecast more easing at a later date. Twelve see no prospect of change in the foreseeable future.

This post was published at David Stockmans Contra Corner on October 30, 2015.

Powdering The GDP Pig – – -There Was No Escape Velocity Inside

The talking heads were busy yesterday morning powdering the GDP pig. By averaging up the ‘disappointing’ 1.5% gain for Q3 with the previous quarter they were able to pronounce that the economy is moving forward at an ‘encouraging’ 2% clip.
And once we get through this quarter’s big negative inventory adjustment, they insisted, we will be off to the ‘escape velocity’ races. Again.
No we won’t!
The global economy is in an epochal deflationary swoon and the US economy has already hit stall speed. It is only a matter of months before this long-in-the-tooth 75-month old business expansion will rollover into outright liquidation of excess inventories and hoarded labor.
That is otherwise known as a recession. Its arrival will be a thundering repudiation of the lunatic monetary policies of the last seven years; and it will send into panicked shock all those buy-the-dip speculators and robo-traders who still presume the central bank is omnipotent.

This post was published at David Stockmans Contra Corner on October 30, 2015.

The oil Cartel’s End Is Nigh – OPEC May Split At The December Meeting

As oil prices are now hovering around $45 per barrel, the entire oil and gas industry is looking forward to the next OPEC meeting, due to be held on December 4 this year in Vienna. On October 14, non- OPEC member Mexicoconfirmed its participation in a technical meeting organized by the cartel on October 21 in Vienna to which seven other non-OPEC members were also invited.
‘We are going with a technical delegation to receive information and exchange it with other producers. But Mexico will not take part in any reduction in production volume,’ said Mexico’s Energy Minister Pedro Joaquin Coldwell. The meeting was held last Wednesday and was attended by representatives of five countries: Russia, Brazil, Kazakhstan, Colombia and Mexico. The main agenda of the meeting was to exchange different market views and create a common strategy in response to the current market conditions and low oil prices.
What exactly happened at the meeting?
Venezuela has been the most vocal OPEC member when it comes to the issue of raising oil prices by altering the cartel’s production levels. During the technical meeting between OPEC and non-OPEC members, Venezuela proposed that OPEC must resume its policy adopted in 1980s of fixing the oil price. It suggested a possible ceiling price of $88 per barrel which would naturally require OPEC to reduce its current production levels. In addition, Venezuela also proposed another technical meeting of this kind to be held during the upcoming Dec 4 meeting.

This post was published at David Stockmans Contra Corner on October 29, 2015.

The Housing Mega-BubbleIs Definitely NOT Different This Time – – It’s Much More Of The Same

How do you know when you are in a real estate bubble? That’s fairly easy. Knowing when it will pop is the hard part.
Air pocket between present, bubbled-out house prices driven by the ‘unorthodox, unfundamental, incremental demand using unorthodox capital’ and fundamental, end-user, shelter-buyer affordability has never been larger. At peak bubble, all that it takes is a narrow and shallow stream of a few dumb money buyers to keep the prices of thousands of houses bubbled out, indefinitely. Most everybody else is just hanging on for the ride, unable to transact due to the unaffordability. Then one day market suddenly runs out of dumb money buyers, which is the Wile E. Coyote moment. SF Bay Area is not an example of a healthy, fundamentally-driven ‘housing market’, rather a stimulus-fueled commodities market. Just like in 2007/08, if the ‘unorthodox, unfundamental, incremental demand using unorthodox capital’ suddenly went away, house prices would revert back to what end-user, fundamental, shelter buyers with traditional financing can afford, which is about half of what houses cost today. Why is everybody so sure that the current age of ‘unorthodox, unfundamental, incremental demand using unorthodox capital’ is here to stay? They were all wrong in 2007. Housing bubbles don’t exist in isolation; when the known bubbles finally pop, it will take the rest with it. If everybody in the US had to buy real estate using the same amount down and fully documented 30-year fixed real estate loans, house prices could never detach from end-user, shelter-buyer, employment and income fundamentals in a city of region. There would be – could be – no bubbles. It’s when the ‘unorthodox, unfundamental, incremental demand using unorthdox capital’ enters the market, prices quickly detach from end-user fundamentals and bubbles form swiftly, exactly like we saw from 2003 to 2007 and exactly what we are experiencing today. To believe this isn’t a bubble is to believe that all of the hot momo money from insti’s, high/biotech, flipper, flappers, fraudsters, and foreigners buying houses is fundamental and here to stay, which is exactly what everybody thought in 2006. Or, to believe that interest rates will keep falling 1% per year going forward, which would lend an element of support to prices. It’s not different this time. In fact, it’s exactly the same, including how everybody is absolute and resolute in their belief that house prices always go up and can’t experience another 2007-2010 type crash again.

This post was published at David Stockmans Contra Corner by Mark Hanson ‘ October 29, 2015.

How We Got Here: The Fed Warned Itself About Financialization in 1979 – – Then Spent 4 Decades Studiously Ignoring It

It bears repeating and re-emphasizing, but had the guts of the actual global financial system been fully appreciated in a timely manner the current state of the global ‘dollar’ would be cause for celebration. It would matter not that the eurodollar is in full and often violent retreat because that is the exact method by which a real recovery would be born; if only there were a reasonable market for money (actual, not ephemeral and pliable) and money dealing in place to absorb the transition. The happenstance of the current state of the ‘dollar’ owes itself to the rededicated financialism of every central bank as if 2008 never happened. Rather than look for an actual solution, views of cyclicality ruled where the panic was judged nothing more than a temporary disruption.
It is that general outline that accounts for the recovery, lack of. Market forces practically begged for a total re-alignment, especially since the status quo only survived through the greater oligarchy in money of TBTF. The larger banks have only gotten larger and now they have very little competition since there are practically no new banks anymore. Wholesale continues to dominate, amazingly even more so now than pre-crisis which more than suggests the rotten nature of the very antics proclaimed as monetary heroism.
Except that the wholesale banks themselves no longer want the job of supporting that system. Before 2008, prop trading and spreads were not just favorable but undoubtedly so as any number of unrelated firms suddenly became FICC centric. GE Capital became a leading provider of mortgage warehousing as well as ‘investing’ while formerly uninteresting insurance companies like AIG transformed into both securities dealers and prime purveyors of dark leverage, especially CDS. It was all, of course, artificially inflated by the nature of that time, the Great ‘Moderation’ because the whole system long ago departed basic and operational sense.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider – October 29, 2015.

Money Printers Gone Wild – A Summary of BOJ’s Current And Potential Lunacy

With expectations building that the Bank of Japan may further boost stimulus to keep its reflation program on track, here are some of the obvious – and not so obvious – choices available to Governor Haruhiko Kuroda.
While a third of economists surveyed by Bloomberg expect no further increase in asset purchases from Kuroda’s BOJ, 44 percent forecast a change in policy at the central bank’s meeting on Oct. 30. The remainder think the BOJ will make a move sometime between December and April.
Kuroda, who launched his record asset-purchase program in April 2013 and then bolstered it in October 2014, picks his shots carefully to make the most of his monetary firepower.
The governor said earlier this year there were ‘many options’ available for more stimulus and that the central bank may need to get creative in the case of any further expansion.
The easy road would be more government bond purchases, though more radical ideas such as buying stocks or debt from local governments have been suggested by economists.

This post was published at David Stockmans Contra Corner By Jodi Schneider and Toru Fujioka Bloomberg.

Kickbacks, Conflicts and Darkness: Welcome to Your ‘Modern’ Stock Market

Chances are pretty high that among the daily lexicon of most Americans, you are not going to hear the words ‘maker-taker.’ And yet, outside of the debate about preventing Wall Street’s too-big-to-fail banks to create another epic taxpayer bailout in the future, the maker-taker debate is one of the hottest on Wall Street. On Tuesday of this week, the glacially-slow to respond Securities and Exchange Commission (SEC) held a full day hearing on the ‘maker-taker’ model and other stock market structure dysfunctions.
In simple terms, maker-taker is another wealth extraction tool used by Wall Street firms to pick the public’s pocket in the name of stock market liquidity. In more complex terms, brokers servicing retail clients and institutions (like those managing your pension money) are incentivized to send their customers’ stock limit orders to trading venues that will paythem a rebate (on the premise that they are ‘making’ liquidity) while traders who trade on those limit orders are charged a fee (on the premise they are ‘taking’ liquidity). Thus the maker-taker model.
Finance Professor Larry Harris, of the USC Marshall School of Business, told the SEC panel on Tuesday that ‘fees charged to access standing limit orders are essentially kickbacks that exchanges charge people who want to trade with their clients who offer limit orders. In any other context, collecting such fees would constitute a felony. Although legal in the security markets, they are impediments to fair and orderly markets. They need to go away.’

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Inflation Targeting – The Central Bankers Engine Of Serial Financial Crises

BEIJING – Fixated on inflation targeting in a world without inflation, central banks have lost their way. With benchmark interest rates stuck at the dreaded zero bound, monetary policy has been transformed from an agent of price stability into an engine of financial instability. A new approach is desperately needed.
The US Federal Reserve exemplifies this policy dilemma. After the Federal Open Market Committee decided in September to defer yet again the start of its long-awaited normalization of monetary policy, its inflation doves are openly campaigning for another delay.
For the inflation-targeting purists, the argument seems impeccable. The headline consumer-price index (CPI) is near zero, and ‘core’ or underlying inflation – the Fed’s favorite indicator – remains significantly below the seemingly sacrosanct 2% target. With a long-anemic recovery looking shaky again, the doves contend that there is no reason to rush ahead with interest-rate hikes.
Of course, there is more to it than that. Because monetary policy operates with lags, central banks must avoid fixating on the here and now, and instead use imperfect forecasts to anticipate the future effects of their decisions. In the Fed’s case, the presumption that the US will soon approach full employment has caused the so-called dual mandate to collapse into one target: getting inflation back to 2%.
Here, the Fed is making a fatal mistake, as it relies heavily on a timeworn inflation-forecasting methodology that filters out the ‘special factors’ driving the often volatile prices of goods like food and energy. The logic is that the price fluctuations will eventually subside, and headline price indicators will converge on the core rate of inflation.

This post was published at David Stockmans Contra Corner on October 29, 2015.

The Debate: GOP Candidates Elevated, CNBC Eviscerated

Well now. We actually got our money’s worth last night.
Almost with out exception the GOP candidates conveyed a compelling message that the state is not our savior, while the CNBC moderators spent the night fumbling with fantasy football and inanities about which vitamin supplements Ben Carson has used or endorsed.
But this was about more than tone. The interaction between the candidates and the CNBC moderators revealed the yawning gap between the bubble world at the intersection of Washington and Wall Street and the hard scrabble reality of economic stagnation and political alienation on main street America.
Yes, the CNBC moderators engaged in a deplorable display of gotcha journalism punctuated by a snarky self-righteousness that was downright offensive. John Harwood is surely secretly on the payroll of the Democratic National Committee and it was more than obvious why Becky Quick excels at serving tea to blathering old fools like Warren Buffett.
So they deserved the Cruz missile that came flying at them mid-way through the debate.

This post was published at David Stockmans Contra Corner on October 29, 2015.

Banks that run credit-default swaps market suspect their own corruption

Fifteen of the biggest players in the $14 trillion market for credit insurance are also the referees.
Firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. wrote the rules, are the dominant buyers and sellers and, ultimately, help decide winners and losers.
Has a country such as Argentina paid what it owes? Has a company like Caesars Entertainment Corp. kept up with its bills? When the question comes up, the 15 firms meet on a conference call to decide whether a default has triggered a payout of the bond insurance, called a credit-default swap. Investors use CDS to protect themselves from missed debt payments or profit from them.
Once the 15 firms decide that a default has taken place, they effectively determine how much money will change hands.

This post was published at bloomberg

China’s Steel Demand Evaporating At Unprecedented Speed, Says Top Industry Official

If anyone doubted the magnitude of the crisis facing the world’s largest steel industry, listening to Zhu Jimin would put them right, fast.
Demand is collapsing along with prices, banks are tightening lending and losses are stacking up, the deputy head of the China Iron & Steel Association said on Wednesday.
‘Production cuts are slower than the contraction in demand, therefore oversupply is worsening,’ said Zhu at a quarterly briefing in Beijing by the main producers’ group. ‘Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.’
China’s mills – which produce about half of worldwide output – are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation amid a property-led slowdown. The fallout from the steelmakers’ struggles is hurting iron ore prices and boosting trade tensions as mills seek to sell their surplus overseas. Shanghai Baosteel Group Corp. forecast last week that China’s steel production may eventually shrink 20 percent, matching the experience seen in the U. S. and elsewhere.
‘China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,’ Zhu said. ‘As demand quickly contracted, steel mills are lowering prices in competition to get contracts.’

This post was published at David Stockmans Contra Corner by Bloomberg Business ‘ October 28, 2015.

Mind The 18-Wheelers – Cummins Engine Shares Plunge On Warning

Cummins Inc. fell the most in more than three years after third-quarter profit trailed analysts’ estimates and the company reduced its annual sales forecast because of weakening demand for its heavy-duty engines.
The company also said it’s cutting 2,000 jobs as part of a plan to save as much as $200 million a year. And Chief Financial Officer Pat Ward said on a conference call that Cummins will resume share buybacks this quarter. Its board authorized a $1 billion repurchase program in July 2014.
Cummins reported quarterly earnings of $2.14 a share on revenue of $4.62 billion, trailing the average estimates of $2.60 and $4.91 billion compiled by Bloomberg. Orders in China and Brazil are at multiyear lows with no sign of improvement soon, the Columbus, Indiana-based company said in a statement. Revenue in North America rose 4 percent, compared with an 18 percent decline in international markets.

This post was published at David Stockmans Contra Corner on October 28, 2015.

Sign Of The Top: Chinese Firms Preparing To Top-Tick Hotel Boom In Starwood Bid

At least three big Chinese companies are competing to win Beijing’s approval to bid forStarwood Hotels & Resorts Worldwide Inc., according to people with knowledge of the discussions, setting the stage for what could be the largest-ever Chinese takeover of a U. S. company.
Lodging giant Shanghai Jin Jiang International Hotels (Group) Co., along with HNA Group, parent of Hainan Airlines Co. and sovereign-wealth fund China Investment Corp., each has presented a separate proposal to the Chinese government over the past two months, these people said.
Given the potential size of the deal, the Chinese government wants only one domestic company to make a bid, the people said, so that Chinese companies don’t drive up the price by bidding against one another. Beijing is expected in the next few weeks to make its selection.
Starwood has been running a strategic review process for months and listening to merger bids from companies around the globe, said people familiar with the process. A Starwood spokeswoman declined to comment.
The Stamford, Conn., hotel operator controls brands like Westin, W Hotels and St. Regis and has more than 1,200 properties world-wide. In April, Starwood’s board indicated it would be open to a sale amid concerns it wasn’t growing as fast as rival hotel operators.
It isn’t clear how much the Chinese companies might be willing to pay for Starwood, but people familiar with the discussions said any bid would come at a premium to Starwood’s market value, which was nearly $12 billion at the start of Tuesday.

This post was published at David Stockmans Contra Corner on October 28, 2015.

Global Recession Alert – Hitachi Construction Slashes Profit Outlook To 50% Of Prior Year

Hitachi Construction Machinery Co., Asia’s second-biggest maker of building equipment, cut its sales and profit targets for the year as a slowdown in demand in China extends to the developed world. Its shares fell the most in a month.
The company trails only Komatsu Ltd. in Japan’s construction equipment market and is among the world’s topSUPPLIERS of the large excavators and dump trucks used by miners. Both Komatsu and Hitachi Construction have been quick to warn on the impact of China’s economic woes, and in its first-half earnings report on Tuesday Hitachi signaled the slump in demand is spreading.
‘Sales are expected to fall short of the company’s previous forecast due to demand slowdown in developed countries and further slowdown in emerging markets,’ Chief Financial Officer Tetsuo Katsurayama told reporters in Tokyo. For China, he said there aren’t any signs of a pickup in consumption and the company’s view is that ‘we won’t see a recovery in the second half.’
Hitachi Construction cut its operating profit forecast for the year to March by 44 percent to 30 billion yen ($249 million), according to a statement to the Tokyo Stock Exchange. That’s less than half the operating profit reaped in the year ended March 2015. It also cut its sales forecast by 3.7 percent to 780 billion yen.

This post was published at David Stockmans Contra Corner on October 28, 2015.


On October 2 the BLS reported absolutely atrocious employment data, with virtually no job growth other than the phantom jobs added by the fantastically wrong Birth/Death adjustment for all those new businesses springing up around the country. The MSM couldn’t even spin it in a positive manner, as the previous two months of lies were adjusted significantly downward. What a shocker. At the beginning of that day the Dow stood at 16,250 and had been in a downward trend for a couple months as the global economy has been clearly weakening. The immediate rational reaction to the horrible news was a 250 point plunge down to the 16,000 level. But by the end of the day the market had finished up over 200 points, as this terrible news was immediately interpreted as good news for the market, because the Federal Reserve will never ever increase interest rates again.
Over the next three weeks, the economic data has continued to deteriorate, corporate earnings have been crashing, and both Europe and China are experiencing continuing and deepening economic declines. The big swinging dicks on Wall Street have programmed their HFT computers to buy, buy, buy. The worse the data, the bigger the gains. The market has soared by 1,600 points since the low on October 2. A 10% surge based upon lousy economic info, as the economy is either in recession or headed into recession, is irrational, ridiculous, and warped, just like our financial system. This is what happens when crony capitalism takes root like a foul weed and is bankrolled by a central bank that cares only for Wall Street, while throwing Main Street under the bus.
The employment situation continues to deteriorate on a daily basis as Challenger, Grey & Christmas has reported layoff announcements by major corporations in 2015 that already exceed the total announcements in 2014. This is the reality versus the BLS 5.1% unemployment rate fantasy. Retail sales, which make up two thirds of the economy, are putrid and confirm the dreadful employment market. Corporate profits among S&P 500 companies have fallen for two straight quarters and are picking up steam in a negative direction, as accounting shenanigans cannot disguise falling revenue forever. Earnings per share estimates for future quarters fall on a daily basis.

This post was published at The Burning Platform on 27th October 2015.