Of course, it makes perfect sense - the largest market cap company in the world drops further and experiences a death cross and sure enough - the evergreen Dow Jones Industrial Average ended near the highs of the day - well north of the critical 'retirement-on' 13,000. In general risk-assets were quietly correlated with stocks today (amid relatively quiet volume on the major averages) but we note that the capital structure ETFs in general were less exuberant - though they did get a little bounce after the consumer credit data. All-in-all, the Dow stood alone in its non-AAPL exuberance as the rest of the market was mired in the sentment shift that is occurring (note the Dow saw ts 50DMA cross below its 100DMA and its closed perfectly intersecting with those averages). Must be the 'great' jobs number, right? Treasury yields end near their lows of the week, USD near its highs, Gold down on the week though at 3-day highs (supporting stocks), and high-yield credit weak today. Paging Skynet...
In just over one hour the Canadian government will hold a press conference on the troubled Nexen/CNOOC deal: a deal that will make or break many M&A merger arbs or 2012. And judging by the algo reaction in the past few minutes, i.e., the complete collapse in NXY stock, the deal is off. So who is about to get crushed? Below is a sort of all hedge and mutual funds who added the most NXY stock in Q3, i.e., those who decided to pick pennies in front of a steam roller in hopes the Canadian government lets the deal through, with far more downside than upside if said assumption fails. All we can say is: Oops Paulson.... Again.
A month after consumer credit rose by $12 billion (revised) driven by car and student loans, even as revolving credit declined, total consumer credit in October once again rose in both revolving and non-revolving categories, up by $14.2 billion, consisting of $3.4 billion in revolving and $10.8 billion in non-revolving. This number will probably get revised lower next week. The number which will not be revised lower is the composition of sources of consumer credit, where the Government sourced 70% of all new loans (on a NSA) basis: $7 bilion of a total of $10.3 billion. For some perspective, the US government has funded $114 billion of the total $156 billion in total consumer debt in the past year. Between the Fed and Uncle Sam, who needs banks?
When it comes to commodities priced "per ounce", the two most quoted products are silver, and of course gold. But in a broader context are these prices a lot or little? How do some other less known commodities stack up to the world's two most precious metals. Here are the prices for a wide universe of other compounds which are also priced on a "per ounce" basis...
We have seen numerous articles as of late discussing how the average American family has finally delevered their household balance sheet at last. The problem is that apart from mortgage debt, whose decline has been facilitated by massive central bank and governmental intervention, other debt is still being piled on. These other debts are at substantially higher rates than mortgages and negatively impacts the consumer's ability to save. This is why savings rates continue to fall. As full-time employment remains elusive, the average American continues to resort to debt, and governmental support, to fill the gap between waning real incomes and their expected standard of living. This is a game that has a finite end. The diversion of income from savings to support debt service requirements will continue to impede economic growth until such time as either debt returns to levels that are conducive for higher levels of personal savings or incomes rise. This leaves consumers trapped between the need to payoff of debts in order to free up cash flow but needing increased levels of debt to sustain their standard of living. In the end the consumer will delever, either by choice or by force, the only difference between the two outcomes is the length of time that the current economic malaise lasts.
The next time someone has the temerity to tell you you can't spend your way to uber-wealth, first spit in their non-Keynesian face, and then make yourself a little richer by buying the following broken record (or CD): "Deck the halls with Macro follies" featuring the following mega hits "Oh GDP" by Paul Samuelson and "Income Equals Expenditure" By J.M Keynes (as well as their far less known B-siders such as Hayek). So don't delay, and get rich today the moar, moar, moar, moar spending way.
By now there can be no doubt that due to Bernanke et al's endless intervention in any and all capital markets, the "market" is no longer a mechanism that discounts the future in any way. In fact, instead of predicting the future, all the market has become is a backward looking race in which collocated algos respond to historical data - flashing red headlines - and attempt to out run each other in who can buy or sell more free for all, knowing full well at least one other greater fool will be behind them to pick up the pieces. Sadly, fundamentals as a driver to valuaton no longer exist. But such is life under central planning. Yet there is one thing that the market responds to - it is politicians and the uncertainty that political risk brings with it. This certainly includes that most political of organizations, the Federal Reserve, whose stimulative intervention into capital markets two months before the presidential elections was without precedent. Yet even here, the market has managed to decouple from reality, and is trading at level far greater than what political uncertainty risk implies. As the chart below from Citi's Matt King shows, a correlation between BBB spreads and a broader proprietary uncertainty index, there is currently a roughly 50% political risk premium that is not being priced into stocks.
Increasingly it is appearing that all those things formerly considered "fixed", are not. Latest case in point, Egypt where despite the general population's very finite attention span having been fully exhausted on all things Cairo-related back in the spring of 2011, the locals counterrevolutionary natives are once more getting restless and absent some miracle, the days of the US puppet appointed "democrat"-cum-self appointed dictator Mursi are numbered.
It is a truism that food is expensive in America. What if we ask, "is 'real' food expensive in America?" Apologists often cite four reasons why people (and more particularly, low-income people) tend to eat so poorly in America. None of these excuses hold water. What it boils down to is convenience, marketing and engineering: processed food and fast-food are engineered to "taste good" (i.e. salty, fatty and sweet), marketing hypes them 24/7 and Americans have been brainwashed to worship convenience above all else. So please don't claim real food is "too expensive" to eat. What's "too expensive" is unhealthy processed and fast foods.
Since the financial crisis erupted in 2009, it would appear that Spanish banks saw the writing on the wall early on. Following the path laid out by their American cousins, the following chart suggests that en masse a decision was made that bigger was better (and safer) as the Too Big To Fail model was clearly the industry standard. From 50 major entities, the Spanish banking system is now dominated (well pre-total collapse that is) by 14 considerably larger firms. This is about the most literal definition of the old saying: "TBTF or bust." Although in this case it is "and"... Because the bigger the firm, the more systemically entwined it becomes and the less capable the government is of letting any pain actually occur... quite remarkable. How long before there is just one big Spanish bank? (bad bank, worse bank, worst bank, all coming soon).
When people think of the conventional battery of options the BLS applies to fudge the monthly payrolls number, the labor force participation is the first thing that comes mind: after all the thesis is that old workers are increasingly dropping out of the labor force and retiring. Nothing could be further from the truth as can be seen in this chart of workers aged 55-69, i.e. the prime retirement age. But perhaps a far more important secular issue is the complete lack of pickup in the prime worker demographic, those aged 25-54, which in November dropped by 400k to 94 MM. This is a level first breached in April 1997, in other words in the past 15 years not a single incremental job has been gained in this most productive and lucrative of age groups!
At 11:00 am Eastern, the GOP's John Boehner will continue the teleprompted farce, and in not so many words, will announce there has been no progress on a Fiscal Cliff compromise. Alternatively, he may have bought some deep OTM SPY calls expiring shortly, and will misrepresent the situation behind the scenes in hopes for a quick trend reversal, just as he did back on November 16, providing the only "goalseeked" catalyst that could halt a drop in the SPX on its way to unchanged for the year, and, in collaboration with Nancy Pelosi, preventing AAPL from sliding below $400.
EURUSD is 'weak' (under 1.2900) this morning, having given a week's worth of gains back in just 2 days as it appears (quite unsurprisingly) that even the core or Europe is now becoming embroiled in a total economic depression. While it seems unlikely that the much-discussed optimal-strategy of Germany leaving the EUR will occur before Merkel's re-election, we suspect there will be growing angst that their economic woes are due to their other European cousins. To wit, Germany's Industrial Production Capital Goods (just as we have also seen in the US) have fallen off a cliff in the last two months (almost -3 sigma); it has only been this bad twice in the last twenty years. Perhaps, we need to replace the youth unemployment records with German Capital Goods production as the 'new' scariest chart in Europe, since it seems the Money McBags of the disunion has mounting troubles of its own.