Archive - Jul 16, 2013

QE and hopes/beliefs in its perpetual nature continues to be the key market catalyst. Tracking estimates for Q2 GDP continue to drop below 1%. This is setting up a scenario where GDP for the previous 3 quarters will likely average 1%. If we didn't think that job creation is going to sustain its current pace of growth, we would say this market is heading towards the “Bearmageddon Scenario”. QE3 has fallen short on job creation and GDP growth. The only inflation it has managed to create is in the prices of financial assets- and yet the consensus view of Central Bankers and the market expectation is to do more of the same policies that have not worked. This is Central Banker hubris, believing they can fine tune an economy to specific inflation and unemployment levels only serves as a distraction to markets.

Presented with little comment aside to say - Thanks for nothing Ben...

Fancy making some easy money? Just go in for the ‘Blueprint for Britain’ competition that is being staged by The Institute for Economic Affairs which is asking participants to provide a 2, 000-word piece on how the UK would be able to leave the EU and get around problems such as fitting into the geopolitical landscape and still surviving but going it alone.

Between Kansas City Fed's George's comments on Tapering sooner rather than later and the end of today's POMO, US equities are sliding the most intraday since Bernanke said "moar" last week. Interestingly, the USD is being sold rather notably - a trend that began following yesterday's retail sales miss; but bonds are little changed despite the drop in stocks. Homebuilders have retraced all of their spike gains from the NAHB idiocy and financials are now negative for the week with only Utilities in the green. Gold and Silver are up - as is WTI but oil is leaking lower as stocks fade.

Since the US monetary system is (mostly) a closed loop, it has become impossible to rely on the US stock market for anything besides "analyzing" how many hot potatoes the excess reserve-funded Primary Dealers are juggling with each other. However, there may be one place that remains untouched by the Fed's intervention: foreign opinion of the US, which manifests itself in capital fund flows, the same fund flows that the TIC data reports every month with a 2-month delay. Because if foreign capital flows remain the only remaining objective indicator of US economic health, then the US has some very serious problems on its hands...

Homebuilder stocks are already giving back their spike gains from the surreal "if we hope it, they will buy" numbers from the NAHB on future sales expectations but we thought - given the unprecedented spike in mortgage rates, collapse in mortgage applications, and slowing home sales - that a couple of charts were in order to reflect upon the best two-month rise in 'hope' for futures sales in 22 years...

At this point any sane person would scream, “STOP.” The driver is clearly a madman and shouldn’t be let anywhere near the driver’s seat. Moreover, he’s totally lost all credibility and isn’t to be trusted.

As car sales collapse once again in Europe (and Fiat at the top of the pile of dismal results), and the Italian Senate set to hold a no-confidence vote in the Deputy PM, we thought it an opportune moment to revisit the most ridiculous chart in the world. Presented for your eye-rubbing pleasure, Italy - market vs macro... Can you see when the central-planners 'promise' took over, and reality ended?

Trading of spot bullion of 99.99 percent purity on the Shanghai exchange exceeded 20 tons every day between April 16 and May 6. That’s more than four times the daily average in 2012. Volume reached a record 43.27 metric tons on April 22.

China’s net gold imports from Hong Kong increased 40% in May from a month earlier as the metal’s deepening slump continued to attract bargain hunters to bullion shops in China and Asia.

While the US has had its share of race-related social issues in recent days, nothing compares to Italy where not only was the country's first black minister (of integration!) of Congolese origin, Cecile Kyenge, compared to an orangutan two days ago by Roberto Calderoli, vice president of Italy's Senate and a senior parliamentarian in the anti-immigration Northern League, but following a visit to the city of Pescara she was met with a "protest" where nooses were hung from lammposts. And just so the message was not lost, "he nooses appeared on lampposts with posters signed by far-right group Forza Nuova: "Immigration, the noose of the people!" read one of the slogans on the posters. Another said: "Everyone should live in their own country." Nothing like Italy, whose economy has been ravaged by the worst depression in decades, developing its own Golden Dawn movement to really help with integration issues and globalized worker mobility.

Former House Speaker and presidential hopeful Newt Gingrich said a then-struggling U.S. economy can't afford to spend billions of dollars overseas to buy foreign oil when there was plenty of that Texas tea at home in the United States. Gasoline prices, he said, could drop to $2.00 per gallon if drilling activity increased dramatically in the United States. A year later, nearly 90 million barrels of oil was produced worldwide and almost half of that came from new drilling operations in the United States. Gasoline is still nowhere near $2.00 per gallon even though the United States is mentioned in the same breath as Saudi Arabia...

Some thoughts on why US auto sales are at their strongest pace since prior to the crisis, while EU auto sales are at 20 year lows.

Those hoping that the Stalingrad & Propaganda 471 would soar above 1700 today on some abysmal Industrial Production will have to taper their hopes, as the number printed right on top of expectations, or at 0.3%, up from last month's 0.0%. This was driven by a better blend of Manufacturing (+0.3%), Mining (+0.8%), both the highest since February, and Utilities which dipped -0.1%, but far better than the prior two months' -1.6% and -2.8% declines on "cooler|warmer" weather. Parallel to the IP data the Capacity Utilization printed at 77.8, up from an upward revised 77.7 last month, and a fraction above expectations, leading to the first "beat" in the series since 2010 even though the headline number was 0.1 above the lowest print of 2013 to date. Alas, with the Old Normal average in the 80+ range, there is much room to go before the legacy manufacturing slack is absorbed. One thing is certain: QE is not helping.

There are over 4 times as many leveraged bulls as leveraged bears.

Following the hopes and dreams of green-shooters everywhere with April's +0.6% YoY growth in European car sales, the last two months have been a bitter disappointment as sales have collapsed once again - down 6.3% YoY in June. Sales have been negative year-over-year for 18 of the last 19 months - longer than the 18 months during the financial crisis in 2008/9. Car manufacturers are not amused and are demanding action, as Reuters reports, "What is the government waiting for to enact measures to support investment in this key sector?"