Rare Blood Moon Coming

We momentarily interrupt economic news with some celestial news that may be of interest to millions, including some of my readership.

Wednesday morning, in the early AM, a full lunar eclipse will turn the moon red. The lunar eclipse will be visible over much of the US, especially the West.

Accuweather has some details in Lunar Eclipse to Veil Moon Red in Predawn Hours of Wednesday

"It's not that often that we get a total eclipse from the United States; sometimes we go years between getting them," Slooh Astronomer Bob Berman said, adding that it is a very unusual situation. "If you had to pick one time to set the alarm and go out, I'd say do it at 6:15 a.m. EDT," he said.



Moon to Turn Blood Red

Space.Com reports Total Lunar Eclipse Next Week Will Turn the Moon Blood Red



Rare 'Selenelion' Moon

Yahoo reports Total Lunar Eclipse On Wednesday Will Be a Rare 'Selenelion'

On Oct. 8, Interested skywatchers should attempt to see the total eclipse of the moon and the rising sun simultaneously. The little-used name for this effect is called a "selenelion," a phenomenon that celestial geometry says cannot happen.

And indeed, during a lunar eclipse, the sun and moon are exactly 180 degrees apart in the sky. In a perfect alignment like this (called a "syzygy"), such an observation would seem impossible. But thanks to Earth's atmosphere, the images of both the sun and moon are apparently lifted above the horizon by atmospheric refraction. This allows people on Earth to see the sun for several extra minutes before it actually has risen and the moon for several extra minutes after it has actually set.

As a consequence of this atmospheric trick, for many localities east of the Mississippi River, watchers will have a chance to observe this unusual sight firsthand. Weather permitting, you could have a short window of roughly 2 to 9 minutes (depending on your location) with the possibility of simultaneously seeing the sun rising in the east while the eclipsed full moon is setting in the west.

If I had my choice of locations I would pick somewhere on the West coast, perhaps a place like Joshua Tree National Park with interesting rock formations and trees in which to frame the moon.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The Only Part of Disney Losing Money - Euro Disney

Mona Lisas and Mad Hatters, sons of bankers, sons of lawyers.

I visited Euro Disney in 1994, two years after it opened. After informing our Parisian cab driver that we wanted to go to the new theme park, he nodded quietly, started the meter, and sped off. While a colleague checked on his current destination on the walkie-talkie, our driver chuckled while saying "Euro-disne." The cultural disdain the Frenchman had for this American affront (and the dumb tourists heading there, it must be said) was clearly palpable.

I suppose that this memory stays with me insofar as Euro Disney has been unprofitable for much of its existence. For what reason I have not really understood since it is virtually indistinguishable from any other Disney theme park in the world as far as I can tell. If they do well, then why can't Euro Disney? My memory aside, the fact is that for all the French snootiness about cultural preservation when faced with the onslaught of Americanization-as-globalization, the second-largest market for McDonalds worldwide is France. So, it cannot be a purely cultural phenomenon going on here as Walt's company engages in a debt-for-equity swap:

Walt Disney Company will inject cash into Euro Disney as part of a recapitalization plan worth about 1 billion euros, or about $1.25 billion, in hopes of improving the troubled theme park operator’s financial position. Disney, the California media and entertainment giant, will inject €420 million in cash in exchange for shares. Euro Disney’s debt will be reduced as the parent company converts about €600 million in debt into shares. Disney, which owns 40 percent of Euro Disney, will also defer certain loan payments until 2024.

For another thing, Euro Disney is hardly dependent on the French market. Remember that France is by far the world's most popular tourist destination. Partly chalk this down to a generalized European downturn, then, as bringing the family to the outskirts of Paris is one of the first things to go on the to-do list:

Euro Disney, which opened outside Paris in 1992, has struggled over the years with financial issues, mainly tied to its debt. The French company last turned an annual profit in 2008 ahead of the financial crisis, when it had an occupancy rate of over 90 percent at its resort hotels and more than 15 million visitors. Euro Disney earned €1.7 billion that year. 

It has posted an annual loss every year since then, topping €78 million for the fiscal year ending on Sept. 30, 2013. The company also has seen a severe decline in visitors in the past two years after surpassing 16 million in 2012. That year, Disney agreed to refinance €1.3 billion in debt for Euro Disney. The French company has suffered declining attendance this year, which has cut into its revenue forecasts. Euro Disney had 14.9 million visitors in 2013 but expects to have only 14.1 million to 14.2 million visitors this year.

They make business cases out of Euro Disney since its financial performance remains enigmatic until now. Meanwhile, the parent company is hardly strapped for cash so it's riding in to the rescue as it has so many times before. You have to wonder though if it may throw in the towel sometime after spending good money after bad time and again.

All Clear for Junk Bonds?! Key Questions of the Day

Following a 2.1% decline in junk bonds, the most since 2013, BlackRock and Morgan Stanley say yields are enticing.

Apparently there is never supposed to be a decline ever because with that trivial decline, Wall Street Declares All Clear for Junk Bonds.

It’s time to get the junk-bond party going again.

Morgan Stanley (MS) to BlackRock Inc. (BLK) say it’s time to buy after yields on high-yield, high-risk securities rose to the highest in a year on Sept. 29, resulting in losses not seen since the mid-2013, Federal Reserve-induced taper tantrum.

“We now see risk/reward as more attractive than it has been in over a year,” Morgan Stanley analysts Adam Richmond and Jeff Fong wrote in a report today titled “Buy High Yield.” While junk-bond buyers seemed sanguine about risk earlier in the year as the market soared, “we no longer see the same complacency among investors in aggregate.”

After Fed officials bemoaned the $1.3 trillion market for showing “reach-for-yield” behavior earlier this year, investors have been souring on the notes that posted annualized returns of 18.6 percent since 2009. The notes lost 2.1 percent in September, the most since a 2.6 percent slump in June 2013, according to Bank of America Merrill Lynch index data.

Yields on the speculative-grade debt have risen to as much as 6.74 percent on Sept. 29 from the record low of 5.69 percent in June, the data show. They were at 6.35 percent as of Oct. 3.

“High-yield has widened out and increased in attractiveness,” Jeffrey Rosenberg, the chief investment strategist for fixed-income at New York-based BlackRock, said in an interview today with Bloomberg Television.

Perspective on "All Clear"

Let's put a bit of perspective on the "All Clear" signal using the Barlclays high yield fund (JNK) as a proxy for attractiveness, complacency, value, and risk in junk bonds.

JNK Monthly Chart



click on chart for sharper image

I am relieved to know that things are "all clear" and it's "time to get the junk-bond party going again".

I am wondering though, since March of 2009, when did the party ever end?

Key Questions of the Day

1. Do these guys really believe what they are saying?
2. Or, by any chance are BlackRock and Morgan Stanley looking to dump what they have, and that's the reason for the "all clear" call?

Either way, the answer isn't pretty.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

German Factory Orders Slump 5.7%, Most Since January 2009

The grim news in Europe continues, this time led by Germany. Bloomberg reports German Factory Orders Slump 5.7 Percent.

Orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, the Economy Ministry in Berlin said today. Economists predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey. The data are volatile, and the drop followed a 4.9 percent increase in July that was the most in more than a year. Orders fell 1.3 percent from a year earlier.

Export orders dropped 8.4 percent in August, while domestic demand slid 2 percent, the ministry said. Investment-goods orders plunged 8.5 percent and basic goods orders slid 3 percent, while consumer goods rose 3.7 percent.

While August orders were weak partly because of school holidays, they were also affected by the slowing euro-area economy and geopolitical risks, the ministry said.

Biggest Decline Since January 2009

The Financial Times reports German Factory Orders Suffer Biggest Fall since 2009 Crisis.

Factory orders fell 5.7 per cent in August compared with the previous month, the biggest drop since January 2009 when demand slumped in the aftermath of the global financial crisis.

However, Germany’s economy ministry, which released the figures on Monday, played down their significance, saying the timing of school holidays had influenced the result.

Morgan Stanley cautioned clients against “reading too much into a single report” after factory orders rose by 4.9 per cent in July.

German Factory Orders Monthly Change



Smoothing Out the Volatility

To be fair, German factory orders are volatile. So let's presume timing of school holidays is behind the July increase and the August decline. With that in mind, let's take a simple average of the last two months.

The average result is a decline of 0.4% per month, for the last two months. That process also means four consecutive months of decline.

But what about export orders? Is that 8.4% decline entirely attributable to school holidays?

No matter how you slice it, the "don't worry, be happy, it's mostly a school-related holiday phenomena" viewpoint is more than a bit Pollyannaish.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Air Strikes on Isis Not Working; What's Next?

Isis fighters are closing in on the city of Kobani near the Turkish border. ISIS evades air strikes simply by scattering when planes approach.

The Guardian reports Air Strikes Against Isis are not Working, say Syrian Kurds.

US-led air strikes in northern Syria have failed to interrupt the advance of Islamic State (Isis) fighters closing in on a key city on the Turkish border, raising questions about the western strategy for defeating the jihadi movement.

Almost two weeks after the Pentagon extended its aerial campaign from Iraq to neighbouring Syria in an attempt to take on Isis militants in their desert strongholds, Kurdish fighters said the bombing campaign was having little impact in driving them back.

Isis units have edged to within two kilometres of the centre of Kobani, according to Kurds fighting a rearguard action inside the city. The jihadis, who this weekend generated further outrage with the murder of the British hostage Alan Henning, are simply too numerous to be cowed by the air assault by US fighter jets, the Kurds say.

“Air strikes alone are really not enough to defeat Isis in Kobani,” said Idris Nassan, a senior spokesman for the Kurdish fighters desperately trying to defend the important strategic redoubt from the advancing militants. “They are besieging the city on three sides, and fighter jets simply cannot hit each and every Isis fighter on the ground.”

He said Isis had adapted its tactics to military strikes from the air. “Each time a jet approaches, they leave their open positions, they scatter and hide. What we really need is ground support. We need heavy weapons and ammunition in order to fend them off and defeat them.”

What's Next?

Most likely the US will drop more and more bombs, with 20% of the bombs finding the right targets, 40% the wrong targets, and the remaining 40% doing nothing. This will be labeled as a "success".

However, many so-called moderates will get fed up with US action and join ISIS.

Then, after another beheading or two, Obama will send in more ground troops and weapons, but purportedly only for training and aiding moderates who will take the weapons and training in directions contrary to the stated intentions.

My Take

The US and UK  should issue a  travel advisory labeled "beheadings happen". The advisory should tell everyone, including journalists to get the hell out of the region and if they don't, they are on their own.

Tax dollars should not go to protect those who voluntarily put themselves in harm's way. This is not a disparaging comment on journalists, who choose to do what they do. I commend them for wanting to get the story out.

Rather, my comments are a simple practical matter: The US has no obligation to protect anyone who voluntarily puts themselves in harm's way outside the US.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Forex Fantasyland: Venezuela's 'Official' Rate

Would you like some truth with that?

Latin America's current state-of-the-art in economic mismanagement is exemplified by Venezuela, but that's not really saying much for it's arguably been the regional leader for several years now. Galloping inflation, shortages of basic commodities, runaway crime rates...everything bad is happening there, and any half-wit can see through their leaders' deception that "it's all the fault of the West." Life is what you make it, and I'm afraid the econo-comedians who actually buy into all that socialist stupidity get what they deserve.

A few months ago, I discussed the four-tiered exchange rate system in Venezuela, beginning with that from forex fantasyand, the "official" rate, to that which actually prevails in the streets of Caracas which is many times higher. If it's hard to imagine this abstraction, the good folks at Reuters have now produced a photo essay illustrating how ludicrously expensive different items would be if we believed the "official" exchange rate and nasty things like galloping inflation did not exist. With a nod to the Economist's Big Mac Index, I took the example of the burger whose price has risen much in recent weeks:

Venezuela's economic crisis has led to some shocking and surreal price distortions that hit people's buying power dramatically.

While the government of President Nicolas Maduro calls the country's minimum wage of Bs. 4,252 the highest in the region when converted to $675 using the official exchange rate [Bs. 6.3 to 1 USD], the galloping black market for currency considers it as just $42.50 when converted at the street rate of Bs. 100 per US dollar, the rate which many importers and retail outlets must use to acquire hard currency.

Venezuela's annual inflation rate of more than 63 percent is the highest in the Americas, according to official statistics. 

Now you understand what misery truly is--although I expect it to things to get even worse there. 

800 Towns in Catalonia Pledge Support for Independence Referendum; Humpty Dumpty Chides Artur Mas

Inquiring minds may be interested in the latest events in Europe on an otherwise slow news weekend. Via translation from El Singular, 800 Towns in Catalonia Openly Pledge Support for Independence Referendum.

This morning, more than 800 mayors delivered to Catalan president Mas certificates in support of the November 9 referendum for Independence. The mayors represent 96% of the Catalan municipalities. A total of 920 councils who have so far voted in favor of N-9, but some mayors did not want to participate in the event.

Since 1918 there has not been a similar concentration of mayors in Catalonia.

The Mayor of Barcelona, ​​Xavier Trias, thanked the 800 mayors who approved the motion to defend the right to decide.

"It is our responsibility to fulfill the legitimate mandate coming from all over Catalonia," emphasized Trias and asked the mayors to do everything they can to ensure Catalans have the right to vote on November 9.

71% of Catalans Support Right to Vote

The Wall Street Journal notes overwhelming support for the referendum.

A poll taken last week by the regional government’s Center of Opinion Studies found 71% of Catalans favored the Nov. 9 referendum.

Catalan separatists say Spain’s central government doesn’t respect their language and culture, or give them a fair return on their taxes. Spanish leaders say Catalonia has plenty of autonomy, and that the Catalan political class just needs to put its house in order.

Without a doubt the number would be far higher than 71% if Spain's government had not declared the vote illegal.

Catalonia Autonomy

Let's take a look at the region of Catalonia.



Statutes of Autonomy

In the Spanish Constitution of 1978 Catalonia, along with the Basque Country and Galicia, was defined as a "nationality". The same constitution gave Catalonia the automatic right to autonomy, which resulted in the Statute of Autonomy of Catalonia of 1979.

Both the 1979 Statute of Autonomy and the current one, approved in 2006, state that "Catalonia, as a nationality, exercises its self-government constituted as an Autonomous Community in accordance with the Constitution and with the Statute of Autonomy of Catalonia, which is its basic institutional law, always under the law in Spain".

The Preamble of the 2006 Statute of Autonomy of Catalonia states that the Parliament of Catalonia has defined Catalonia as a nation, but that "the Spanish Constitution recognizes Catalonia's national reality as a nationality". While the Statute was approved by and sanctioned by both the Catalan and Spanish parliaments, and later by referendum in Catalonia, it has been subject to a legal challenge by the surrounding autonomous regions of Aragon, Balearic Islands and the Valencian Community, as well as by the conservative People's Party.

Spain's Constitutional Court assessed the disputed articles and on 28 June 2010, issued its judgment on the principal allegation of unconstitutionality presented by the People's Party in 2006. The judgment granted clear passage to 182 articles of the 223 that make up the fundamental text. The court approved 73 of the 114 articles that the People's Party had contested, while declaring 14 articles unconstitutional in whole or in part and imposing a restrictive interpretation on 27 others.

The court accepted the specific provision that described Catalonia as a "nation", however ruled that it was a historical and cultural term with no legal weight, and that Spain remained the only nation recognized by the constitution.

Humpty Dumpty Chides Artur Mas

Catalonia is already a nation but the term has no "legal weight".

'When I use a word,' Humpty Dumpty (Mariano Rajoy) said, in a rather scornful tone,' it means just what I choose it to mean, neither more nor less.'

'The question is,' said Alice (Artur Mas) 'whether you can make words mean so many different things.'

'The question is,' said Humpty Dumpty (Mariano Rajoy), 'which is to be master - that's all.'

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com