Five Things You Need to Know: Retail Sales; China Backtracks; Investors Refill Their Goldman Sachs With $3 Bln; Greenspan's Architecture; Real-Life Liquidity Crisis Spreading to Fake Life!
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Retail Sales
Retail sales rose more than forecast in July, posting a 0.3% increase, the Commerce Department reported.
- The increase follows last month's revised 0.7% decline which was smaller than previously estimated, the Commerce Department said.
- Previously, sales were reported down 0.9% in June.
- Sales of all retailers excluding auto and parts dealers climbed in July by 0.4%, in line with economists' expectations.
- Among segments showing the largest gains: eating and drinking places, +1.3%; clothing stores, +1.3%; electronic stores, +1%; general merchandise stores, +0.9%; furniture retailers, +0.5%.
- Even building material and garden supplies dealers - among the worst performing segments thanks to a general housing slowdown - managed to show a gain, +0.2%.
2. China Backtracks
As expected, China's Central Bank appeared to backtrack on comments recently made by two financial officials suggesting an unloading of U.S. dollar assets are one means of weaponizing a growing trade dispute.
- China's dollar assets, including American government bonds, are an "important component'' of the country's foreign exchange reserves investment, the central bank said in an article published by the official Xinhua News Agency Bloomberg reported.
- A U.K. Daily Telegraph report we mentioned last Wednesday, quoted "two officials at leading Communist Party bodies" as saying, "The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar."
- Today Xinhua, quoting an "unidentified official from the People's Bank of China" said "China is a responsible investor in the international financial market."
- "We keep a long-term and strategic vision'' when deciding the currency asset structure, the official reportedly said.
- As noted last week, this is the bottom line: Just as the U.S. Treasury Secretary - whichever one happens to be in office at the time - postures politically for a "strong U.S. dollar," this so-called "nuclear option" of dumping U.S. dollar assets was likely a similar case of political posturing from China.
3. Investors Refill Their Goldman Sachs With $3 Bln
Goldman Sachs (GS) this morning said a group of investors that includes Eli Broad and Hank Greenberg will sink $3 billion into one of its biggest hedge funds.
- Goldman's Global Equity Opportunities Fund fell 28% in August, assets declining to $3.6 billion from more than $5 billion in July.
- In addition, the investment bank said two other hedge funds it manages - Global Alpha and the North American Equities Opportunities Fund - also suffered during the market dislocation, Associated Press reported.
- Goldman said it "reduced risk and leverage" in the funds to stem losses.
- Interestingly, we learned on a GS conference call this morning that the Global Equities Opportunities fund is leveraged "only" 3.5 times, lower than initially planned, but about where it will stay going forward.
- Seeing that the Global Equities Opportunities fund is down "in the low 30% range for the year," according to Goldman, all of it coming just the last week, that's probably a good idea.
4. Greenspan's Architecture
Former Federal Reserve Chairman Alan Greenspan has been hired by Deutsche Bank (DB) as an adviser to its corporate and investment banking unit, according to news reports.
- The former Federal Reserve chairman Greenspan will "share his perspective and opinions on a range of issues affecting markets," Deutsche Bank said in a press release.
- Greenspan's "position as one of the architects of the modern financial system gives him a unique perspective from which to help our clients make critical risk management decisions," Deutsche Bank Chief Executive Josef Ackermann said.
- Greenspan also has a similar consulting relationship with Pacific Investment Management Co. (PIMCO) but will not be focusing on issues related to DB's asset-management arm to avoid conflicts of interest, the Wall Street Journal reported.
- Hmmm, it's almost as if DB used the phrase "architects of the modern financial system" in a positive way.
- Meanwhile, central banks around the world on Thursday and Friday were desperately searching for this system's blueprints...
5. Real-Life Liquidity Crisis Spreading to Fake Life!
Forget the stupid credit meltdown in the real world, even the fake banks are melting down!
- The biggest bank in the virtual world of Second Life has closed its doors after a run on its deposits, the Sydney Morning Herald reported.
- Ginko Financial. owned by a Brazilian from Sao Paulo whose real name is Andre Sanchez , stopped accepting deposits, froze all withdrawals and converted account holders' balances into "tradeable debt securities" called Ginko Perpetual Bonds, the SMH reported.
- The bonds can be bought and sold on the World Stock Exchange (WSE), the largest of three sharemarkets in Second Life, while Ginko hopes to replenish its reserves.
- The bank claimed to have 18,000 accounts and deposits amounting to $700,000 in real money.
- The currency in Second Life is called the Linden ($L) and is convertible into US dollars at an exchange rate of $L270 to the dollar.
- Because there aren't enough opportunities in real life to lose money, we need to figure out how to lose real money in the fake world too!
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