China Interest Rate Crisis Continues: 7-Day Interest Rate Doubles to 10% in One Week; China Bans Words “Cash Crunch”

globaleconomicanalysis.blogspot.com / Mike “Mish” Shedlock / Monday, December 23, 2013 3:21 AM
A “cash crunch” is on in China. But don’t call it that, because China banned use of the term last week.
The New York Times reports China Rates Approach Crisis Levels Despite Central Bank Measures.

 An exceptional bid by China’s central bank to curb soaring interest rates and relieve pressure on the financial system appeared to have come up short on Monday, as Chinese money market rates shrugged off the measure and continued to approach the crisis levels seen in June.
The central bank, the People’s Bank of China, said late Friday that it had provided more than 300 billion renminbi, or about $50 billion, in short-term funds to selected banks over a three-day period that week.
Rates continued to surge on Monday, however, in China’s money markets — a key source of short-term funding for commercial banks and also for financial institutions engaged in risky, off-balance-sheet shadow lending.

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Former Goldman Banker To Head CMHC: “Canada’s Mortgage Monster”

Back in 2011 and 2012 we profiled the one organization that was among the key support pillars not only under Canada’s housing market (and according to many, bubble), but also the entity that by providing tens of billions in cash and loan support to Canada’s banks, served to rescue the financial sector from rather unpleasant consequences: the Canadian mortgage insurer Canada Mortgage & Housing Corporation (CMHC) also known as “Canada’s Mortgage Monster.”
Recall from a 2012 report by the Canadian Center for Policy Alternatives:

 The official story of the 2008 financial crisis goes like this: American and international banks got caught placing bad bets on U.S. mortgages and had to be bailed out. But not in Canada. Through the financial crisis, Canadian banks were touted by the federal government and the banks themselves as being much more stable than other countries’ big banks. Canadian banks, we were assured, needed no such bailout.

However, in contrast to the official story Canada’s banks received $114 billion in cash and loan support between September 2008 and August 2010. They were double-dipping in not only two but three separate support programs, one of them American. They continued receiving this support for a protracted period while at the same time reaping considerable profits and providing raises to their CEOs, who were already among Canada’s highest paid. In fact, several banks drew government support whose value exceeded the bank’s actual value. Canadian banks were in hot water during the crisis and the Canadian government has remained resolutely secretive about the details.

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First Trust NASDAQ Global Auto Index (NYSE: CARZ): This ETF Could Be the Biggest Winner in 2014

ETFs are designed to decrease risks by offering investors access to a group of stocks. However, the use of highly specialized indexes by ETFs can increase exposure to the riskiest sectors and lead to large losses when trends reverse. To find the right balance, we look for ETFs that have diversified holdings and can benefit from several investment trends.

Heading into 2014, we see several important economic themes developing that should have a large impact on stocks. In the U.S., robust retail spending in November and an upward revision to October's data has led to hopes that consumer spending will pick up in 2014. Since consumer spending accounts for about two-thirds of GDP, it is unlikely we'll experience a recession if this trend continues.

Recent data also indicates that Europe will finally be joining the U.S. economy in an expansion. And with Asian economies expected to expand too, this could be the first synchronized global expansion since at least 2008, when the credit market crisis sparked deep economic declines around the world.  (more)

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ISIS Pharmaceuticals, Inc. (NASDAQ: ISIS)

Isis Pharmaceuticals, Inc. engages in the discovery and development of antisense drugs using novel drug discovery platform. The company’s flagship product, KYNAMRO injection, is an apo-B synthesis inhibitor for patients with homozygous familial hypercholesterolemia for the reduction of low-density lipoprotein cholesterol. It also has a pipeline of 28 drugs in development for the treatment of cardiovascular, severe and rare, neurologic, and metabolic diseases, as well as cancer. The company has collaboration agreements with AstraZeneca to discover and develop antisense drugs against five cancer targets; Biogen Idec to develop and commercialize ISIS-SMNRx for the treatment of spinal muscular atrophy; and Bristol-Myers Squibb to discover, develop, and commercialize antisense drugs targeting proprotein convertase subtilisin/kexin type 9.
Please take a look at the 1-year chart of ISIS (Isis Pharmaceuticals, Inc.) below with my added notations:

ISIS has rallied quite nicely for most of the year. Over the last 3 months, the stock seems to have hit a wall at $40 (red). A move through that level would be a 52-week high breakout and should mean much higher prices for the stock. ISIS has currently been holding at $36 (green), so a break below that probably means a fall back down to the previous $30 support (blue).

The Tale of the Tape: ISIS has a key level of resistance at $40. A long trade could be made on a break through that level, with a stop placed under $40. Traders could also enter a long at $36, or a short on a break below $36.

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This is the Key to Gold’s Comeback

For investors having a rooting interest in the price of gold, the catalyst for a recovery may be in sight.

“Buy gold if you believe in math,” Brent Johnson, CEO of Santiago Capital, recently told CNBC viewers.

Johnson says central banks are printing money faster than gold is being pulled from the ground, so the gold price must go up.

And Johnson is on the right track, but central banks have partners in the money creation business — commercial banks.

And while the Fed has been huffing and puffing and blowing up its balance sheet, banks have been licking their wounds and laying low. Money has been cheap on Wall Street the last five years, but hard to find on Main Street.  (more)

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AECOM Technology Corp (NYSE: ACM)

AECOM Technology Corporation, together with its subsidiaries, provides professional technical and management support services for public and private clients in worldwide. The company operates through two segments, Professional Technical Services (PTS) and Management Support Services (MSS). The PTS segment offers planning, consulting, architectural and engineering design, and program and construction management services for a range of projects, including highways, airports, bridges, mass transit systems, government and commercial buildings, water and wastewater facilities, and power transmission and distribution. The MSS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance, systems support and integration, technical personnel placement, and field services primarily for agencies of the United States government.
ACM has confirmed a head and shoulders (H&S) pattern. Please take a look at the 1-year chart of ACM (AECOM Technology Corporation) below with my added notations:

After going almost nowhere this past year, ACM created a key level of support at $28 (blue). That $28 level was also the “neckline” support for ACM’s H&S reversal pattern. Above the neckline you will notice the H&S pattern itself (red).
Remember, patterns such as an H&S need to confirm to have the meaning that they imply. Confirmation of the H&S would occur if the stock were to break below its $28 support, and as you can see, ACM did exactly that last week.

The Tale of the Tape: ACM has confirmed a head & shoulders pattern and should be moving lower. A short trade could be entered on any rallies up to or near the previous $28 level. A break back above $28 would negate the forecast for a move lower and create an opportunity for a long trade.
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US Weekly Economic Calendar

time (et)	report	period	Actual	CONSENSUS forecast	previous
MONDAY, DEC. 23
8:30 am	Personal income	Nov.	0.2%	0.4%	-0.1%
8:30 am	Consumer spending	Nov.	0.5%	0.5%	0.4%
8:30 am	Core PCE price index	Nov.	0.1%	0.1%	0.1%
8:30 am	Chicago Fed national activity index	Dec.	0.25 (3-mo)	--	0.12 (3-mo)
9:55 am	UMich consumer sentiment index	Dec.		82.9	82.5
TUESDAY, DEC. 24
8:30 am	Durable goods orders	Nov.		2.0	-1.6%
9 am	FHFA home price index	Oct.		--	8.5% y-o-y
10 am	New home sales	Nov.		440,000	444,000
WEDNESDAY, DEC. 25
	Christmas Day None scheduled
THURSDAY, DEC. 26
8:30 am	Weekly jobless claims	12/21		N/A	379,000
FRIDAY, DEC. 27
	None scheduled

 
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