Archive - Nov 2013

QE failed for Japan. It has failed for the UK. It ha failed for the US. Collectively, countries comprising over a third of the world’s GDP have proven QE doesn’t work.

As gold prices have fallen, yet another nation is choosing to use the drop to build its reserves. As Bloomberg notes, Turkey’s gold imports that doubled this year are set to reach the highest level since 2005 as the metal's price heads for the first annual drop in 13 years. As Commerzbank notes "there seems to be a lot of interest in physical gold at the current low price," as Turkey imported 251.4 metric tons of gold since January - the biggest tonnage increase since at least 1995 (a rate almost 60% more than 2012's average monthly rate). Turkey was the fourth-largest buyer of gold last year, after India, China and the U.S., World Gold Council data show.

The following chart, from the Balyasny Asset Management Q3 letter to investors, show just that: the magic of hedge fund leverage in the New Normal.

Many will answer "yes" to the five questions - and that has profound implications on what kind of country the US will become for the next generation...

In case the world needed any additional proof that the latest housing bubble (not our words, Fitch's) was on its last legs, it came earlier today from Credit Suisse' Dan Oppenheim who in his monthly survey of real estate agents observed that October was "another weak month" for traffic, with "pricing power fading as sluggish demand persists." This naturally focuses on the increasingly smaller component of buyers who buy for the sake of owning and living in a home instead of flipping it to another greater fool (preferably from China or Russia, just looking to park their stolen cash abroad). Quantifying the ongoing deflation of the bubble, Oppenheim notes that the "weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento.... Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011."

Has a new preoccupation...

With the Chinese property bubble set to burst, the bust may lead to even greater demand for physical bullion from the gold loving Chinese.

The answer is ... 1, and he hasn't paid yet...

Having quietly limped back to retrace the jobs report losses, US equities were beginning to fade back in hurry when we tweeted the market's desparation for a POMO stick-save... sure enough, 2 minutes later, as POMO started, S&P 500 futures took off in an uninterrrupted 13 point surge higher (with bonds, FX, and gold all continuing their 'taper-on' post-payrolls trends ignoring the idiocy in stocks)...

iTesla, or Tespad Model S(parky)?

Whether it is the conference board, Gallup, Bloomberg, or pretty much any other measure of the economic confidence or consumer comfort in the US, the numbers have been falling (or plunging) despite the incessant rise of US equities. The reason this is of particular note, as we have discussed previously, is that this pattern of exuberant highs in stocks with fading confidence-inspiration has ominous overtones for future performance... (especially for those hoping for moar multiple expansion). The UMich data this morning merely confirms the trend with the lowest print since Dec 2011 (3 misses in a row). This is the biggest miss since Feb 2006!

Dismissing for one moment the fact that TWTR for all intent and purpose is now trading red for ($43 handle) for most if not all 'retail' investors unallocated at the IPO, Aswath Damodaran, valuation guru from NYU has taken his spreadsheet of doom to the analysts' forecasts for the dot-com-mania poster boy. As the following chart shows, the 140-character platform will have to generate $32 billion in 2023 to be worth $45 per share - that is a 50-fold increase in revenues over the next decade to justify it's IPO-busting current price. "Twitter is a good company, with the potential to be a great one," he said, but as Bloomber reports, he adds, "but not a good investment," as based on his calculations, TWTR is worth $18 (31% less than its IPO price). It seems the market is getting that...

Following the quantity breakdown of jobs in the month which saw the third biggest jump in people not in the labor force in history and a loss of over 600,000 full-time workers (don't ask how this is possible - not even the BLS knows), next we look at the quality of October jobs. Or lack thereof. Because the top job-gaining sectors were also the worst of all: Leisure and Hospitality; Retail; and Temp Help, namely minimum wage hotel workers and retailers, amounted to roughly half of all job gains.

The wholesale changes at the Fed's Board of Governors in the period ahead are generally under-appreciated by market observers.