• EconMatters
    11/30/2015 - 16:21
    The ISIS group sells most of its crude directly to independent traders at the wellhead for $20-$45 a barrel earning the group an average of $1.5 million a day.

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Russia Threatens "Sanctions Would Hit US Like A Boomerang""

With chatter of overnight invasions increasing and rhetoric surging among the non-Russian-allied nations of the world, Russian foreign Miniister Lavrov has some serious words of warning for the West:


Lavrov added that "hasty and reckless steps" would harm Russian-American relations (and bear in mind Russian lawmakers are already drawing up a bill to confiscate western assets).

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Greek President Raises "War Reparations" With Germany

Greek President Karolos Papoulias raised the issue of World War II reparations to his German counterpart Joachim Gauck currently on a 3-day official visit to Athens. But as expected, Gauck repeated the official legal position of Berlin. Karolos Papoulias told Gauck that Greece has not dropped its compensation claim over the Nazi atrocities and the enforced loan by the Nazi occupiers during the World War II. “I want to point out that Greece has never given up its claim of German reparations, ” Papoulias reportedly told Gauch at a private meeting in Presidential Manson adding “it is necessary to solve the problem with the earliest possible start of negotiations.”

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US Guided-Missile Destroyer Truxtun Has Entered The Black Sea

As we reported yesterday, after getting permission to cross the Bosphorus, the guided-missile destroyer USS Truxtun departed the Greek port of Souda Bay on its way to the Black Sea. As of a few hours ago, it is already there. Sky News reports that the USS Truxtun passed the Dardanelles strait earlier today on its way to the Black Sea amid heightened tension over the crisis in Ukraine and reports that Russia has now 30,000 troops in Crimea.

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Gazprom Threat Sends European Stocks Reeling

European bond markets, simply put, did not blink at anything this week (and Portugal spreads actually rallied) as the insanity of that segment of the market remains. Europe's high-yield credit market moves to near record low spreads (on rumors of an aggressive hedge fund squeeze). But all of this beggars belief as we see European stocks giving up their post-Putin gains and collapsing today on the good-news-is-bad-news from the US but much more critically the Gazprom threats (which smashed Germany's DAX red for 2014 and down around 2% today).

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Bill Gross Responds: "Sick Of [El-Erian] Undermining" Him

Following last week's discovery that Mohamed El-Erian was "sick of cleaning up [Bill Gross's] shit" as tensions soared at PIMCO, the "bond king" has struck back blasting to Reuters that he's "so sick of Mohamed trying to undermine me," claiming El-Erian wrote the damaging WSJ article. Furthermore, the somewhat paranoid-sounding Gross indicated that he had been monitoring El-Erian's phone calls but when questioned by Reuters for evidence of El-Erian's undermining, Gross responded "you're on his side. Great, he's got you, too, wrapped around his charming right finger." As one analyst noted, "I've never seen Bill and Pimco scrutinized like this before... a couple of high-profile stumbles and mediocre showings, coupled with some outflows clearly has some investors on edge."

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Pro-Russia Gunmen Block OSCE Monitors Entering Ukraine; Stymie Obama's Plan

One of the critical steps in President Obama's "off-ramp" de-escalation plan for the crisis in Ukraine was a so-called 'observer mission' by the Organisation for Security and Co-operation in Europe (OSCE) to ensure that all citizens were being treated fairly. That 'plan' has hit a wall this morning as PTI reports that pro-Kremlin gunmen blocked the obersver entry. Seems like another red line just got crossed.

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Record Jobs For Old Workers; Everyone Else - Better Luck Next Month

We have long been pounding the table (certainly since mid-2012) that the US labor market has become a place where mostly older workers - those 55 and over - are hirable - something which has nothing to do with demographics, and everything to do with excess worker slack, and an employer's market to pick and chose those workers that are most qualified for a job since older workers have the same wage leverage as younger ones: none. February was merely the latest confirmation of just this.

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Copper Collapses Most Since Dec 2011 On China Credit Fears

We noted last night that Iron Ore futures prices were in free-fall as the vicious circle of China's commodity-collateral-backed shadow banking system unwind hits home amid fears of contagion from the Chaori Solar default. The first domestic Chinese corporate bond default has retail investors running scared as surprise spreads that the local government did not come to the rescue. The deleveraging is now spreading to copper prices (remember the massive cash-for-copper schemes of last year) as borrowers are forced to sell to meet cash calls which in turn drops copper prices, reducing collateral values and tightening credit conditions even more. This is the biggest copper price drop since Dec 2011...

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Stocks Tumble To Red As "Good News Is Bad News"

Having heard the great and good declare this morning's "beat" on the headline NFP data as indicative of 1) the recovery is awesome; 2) the reason why stocks have been rallying; and 3) the recovery is awesome... it appears between a rising unemployment rate, tumbling average hourly earnings, and Gazprom's threat in Europe, stocks are taking this "good news" as "bad news." Confirmed by Hilsenrath that the taper is on - which is what bonds, gold, and the dollar appeared to be saying - the S&P 500 having spiked 10 points is now 13 points off its highs and in the red for the day...

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Where The Jobs Are: More Than Half Of All February Job Gains Are In Education, Leisure, Temp Help And Government

As we showed moments ago, the scariest chart of today's nonfarm payroll report was the plunge in average weekly earnings. For those curious why US workers are unable to make any headway in obtaining higher wages, the following breakdown of just where the 175,000 (seasonally adjusted, because apparently now seasonal adjustments work again) February job gains were should provide some color. Unfortunately, as has been the case for the past several months, well over half the total job gains in February were in industries that pay the least.

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No Raise For You: Earnings Growth Drops To New Post-Lehman Lows

In order to normalize for the weekly hours worked, we decided to look at the big picture which ignores hours worked, and average hourly earnings. So we looked at average weekly earnings. In February, this number was $682.65, down from $683.74 for production and nonsupervisory employees. However, the real impact of declining wages is seen nowhere better than in the annual increase in average weekly earnings. The chart below needs no explanation: when wage growth is at 1%, or half of the Fed's inflation target, you will not get any sustained economic recovery. And what if one looks at the average weekly earnings of all employees? Well, we just hit a new post-Lehman low. 5 years into the "recovery", weekly earnings growth is the lowest it has been in 5 years!

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Gazprom Warns Of "Repetition Of 2009 Gas Situation" In Ukraine

We have discussed the sword of Damocles that is hanging over the heads of the Ukrainian (and European for that matter) people for some time. The dominant role that Russia plays in providing energy is becoming critical, however, as Gazprom notes:

  • *GAZPROM: UKRAINE DEBTS CREATE 'RISK OF RETURN TO SITUATION AT BEGINNING OF 2009' (when Gazprom cut off Ukraine gas supplies)

Of course, the US agreed to $1b bailout yesterday - but that's not supposed to be used as a direct transfer payment to the Russians.

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Stocks Jump And Bonds Dump As Unemployment Rate Rises

The knee-jerk reaction to a better-than-expected (and entirely noise-driven) payroll number (with a rise in the unemployment rate) is a rip higher in stocks and collapse in bonds and precious metals. The USD is surging as USDJPY instantly hit 103.50 (breaking through its 50DMA) providing all the juice stocks need to test that critical Goldman 1,900 year-end target for the S&P 500. It seems, just as we warned earlier, "whatever the number, the algos will send stocks higher - that much is given in a blow off top bubble market in which any news is an excuse to buy more."

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February Payrolls 175K, Beat Expectations Of 149K, Unemployment Rate Rises To 6.7%

So much for the weather. As we warned earlier today, when we said that with everyone expecting a miserable print the only possible result would be a large "beat", sure enough that's precisely what happened. Breaking it down:

February payrolls: +175K, Exp. 149K, Last revised from 113K to 129K).
Unemployment rate: 6.7%, Exp. 6.6%, Last 6.6%.
Labor participation rate: 63.0%, Last 63.0%

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