The Banking and Strategy Initiative

Chillin' out till it needs to be funded

It’s Monday Again! : 9 inches of Snow in Times Square, the Fed continues worrying about a Fat Balance sheet (The week ahead January 06 – 10, 2014, US Economy & Markets)

First things first, as expected the 9ers brushed aside Aaron Rodgers, Jim Harbaugh is still happy and the promised snow( we had it on the headlines last week) came and conquered the North East leaving Moday in a swirl.

Ofcourse that means the NFC is probably the more interesting to follow with a rejuvenated Panthers presenting another challenge to the Niners in the coming weekend playoff calendar while the Patriots only know the Colts too well and Broncos are unlikely to give anything away.

That thus means we are taking lines on Broncos and the Patriots making it to the Superbowl XLIX but almost no one will make a profit betting on the surefire Seattle Seahawks which they would almost certainly be facing. The banks strat off the Earnings season on January 14th , with JP Morgan finally sunk in a non Tax deductibe $2 Bln settlement  in the Madoff fraud cases. They would be paying $1.5 Bln to the Justice Department and the other $500 mln to units of the Treasury Department.

Meanwhile Charles Plosser made it clear that as the Fed continues to support the Economy with $80 Bln in monthly purchases, they would need to sharpen the cliff edge of the Taper as corporates remain flush and Big Banks continue climbing up the rates curve at the long end because the $5 Tln Fed Balance sheet could soon become more of  a thorn in the flesh. But among other speakers it was obious that the main worry was the Economy and the 30 yr mortgage rate bringing down demand in the Housing market would soon be the main course for Yellen’s Fed with the Jobs rate not picking up monthly ( 200k likely on Jan 10)

The 7%  minimum set for the growth in 2014 in China turns out to be a breakeven for China to generate a million jobs every month (Sun, HSBC) but with the reprioritised agenda and a slowdown in effect in Europe, th week’s other reports on inflation and Trade data on Wednesday would underline the challenges. Meanwhile the Monday’s simultaneous releases of Services PMI data showed up a universal slowdown but witha positive employment tick and the US Services data will be on at 9, half an hour before the Market open European Investor confidence is up from precious lows, while the yearly Auto Sales figure was indeed a 6 year high in the US almost underlining the indifference to falling PMI and ISM manufacturing scores correcting earlier highs in the Chicago PMI and the ISM in October and November.

Auto Sales grew to 15.6 mln for the year even as GM contracted more than 5% in December and even Ford barely grew. Japanese Cars hope to continue the comeback into 2014 as the falling Yen ( below 110 by year end) reduces pressure on Import prices. Pending Home Sales indices and the Case Schiller slowed down as expected but were still higher on month and more than 12% on year has been maintained on the Case Schiller Index in the NSA numbers across the last 6 months of the year.

Yields started the new year from 3% levels as expected on the 10 year and the prognostication for them is the same with a charted increase to more than 4% and even 5% if the Taper indeed sharpens the cliff edge. Inflation has dulled down though and this week’s data from across the globe will show US struggling to find a reasonable inflation rate while still maintaining the recovery China Mobile will ofcourse be causing some glee to Chinese makers as well as iPhone as 2014 gets underway for their 750 mln subscribers.

The rest of the week will see the Factory Orders data today, Trade Data for the year tomorrow and the Consumer Credit report on Wednesday which we think will start showing credit card debt withdrawal, before it sharply falls off in February while the Auto loans might continue growing while Auto sales start with a low bar again in snow season. Retail sales similarily across the ICSC Goldman Sachs Store Sales, Chain stores  and Redbook will show the past erfect before receding. The December FOMC minutes are released on Wednesday. Meanwhile on Footall again, the last year of BCS sees Auburn making a solo attemt at the Championship in a few hours but the ‘Noles are ready and packing.

In currencies, The Pound is downhill, The Aussie hitting new lows everyday bu tthe currency impasse duo are holding up the Beltway with the Dollar index above 80 and the Euro further up at 1.36 in the New Year. In Wall Street business, Goldman Sachs is off to a good start with investors, Muni business is not going to be so bad so JP Morgan can smile and BofA has other things on its plate but a mutual admiration society for BofA is likely with Citi upgrading it from the trenches and many looking to put its sub par days behin when it starts the year at $13 and a target of $20 no less. Dow ftures are up before the open and I would be travelling this week, so keep buzzing this site with your interest and suggestions till my flight comes in ( yes I know it’s the ship coming in).

Here’s a chilly snap from a friend in Chicago, so the snow fears have reached the MidWest

A grocery store with bare shelves in Chicago


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This entry was posted on January 6, 2014 by in Amitonomics, Bailout Nation, Banking, Emerging Markets, US.


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