Archive - Jul 2013

If the worst Chinese trade data in years (and by that we mean unmanipulated, because what was released last night is merely China offsetting blatantly BS Q1 trade data), and yesterday's S&P downgrade of Italy (which has sent BTPs lower although the EURUSD drop was offset by buying pressure resulting from Stolper closing out his EURUSD long) doesn't send the Stalingrad & Poorski 451 to new all time highs, then all the Chairman's efforts to make a complete farce of the "market" will have been for naught. But while the Fed keeps pushing mom and pop into stocks, he may want to tell his friends at the CME to hike WTI margins, because this morning's latest surge in crude to over $105 will really start hurting refiner margins, and due to the overall energy complex roaring higher, gas prices too, which incidentally just crossed $3.50 in the wrong direction this morning.

Nobody could see this coming, nobody. Then again, by now Goldman's irreplaceable FX strategist, perhaps the most valuable one ever (remember in finance batting 0.000 is the same as batting 1.000), most certainly has a form "mea culpa" letter.

Talk is cheap and action speaks volumes. We may be horribly wrong but we are taking action based on our knowledge. Its time people took responsibility for themselves and stopped bitching.

Big Banks Move Into Uranium Mining, Petroleum Products, Aluminum, Ownership and Operation Of Airports, Toll Roads, and Ports, and Electricity

Equity futures markets (US and Asian) and AUD are sliding off overnight highs amid the worst YoY exports performance in China since October 2009. The 3.1% drop (compared to expectations of a 3.7% gain) is the biggest miss in a year and the first negative print since January 2012 - making the second big miss in a row as the 'fake' trade data driven by the shadow-banking-arbitrage is unwound out of historical data.

Over a decade ago, it was discovered that the NSA embedded backdoor access into Windows 95, and likely into virtually all other subsequent internet connected, desktop-based operating systems. However, with the passage of time, more and more people went "mobile", and as a result the NSA had to adapt. And adapt they have: as Bloomberg reports, "The NSA is quietly writing code for Google’s Android OS." Is it ironic that the same "don't be evil" Google which went to such great lengths in the aftermath of the Snowden scandal to wash its hands of snooping on its customers and even filed a request with the secretive FISA court asking permission to disclose more information about the government’s data requests, is embedding NSA code into its mobile operating system, which according to IDC runs on three-quarters of all smartphones shipped in the first quarter? Yes, yes it is.

Ever wondered what is in your "favorite" McDonald's meal? Then today is your lucky day - the following table from BusinessWeek shows all McDonald’s burgers, ­sandwiches, and salads broken down into their nutritional components, as listed on the ­McDonald’s website. All sandwiches (except Southern Style Crispy Chicken), McWraps, and salads are designated by ­McDonald’s as "Premium." For obvious reasons, the calorie count has been omitted.

• China, the single biggest contributor to global growth over the past decade, slowing markedly.
• World trade now flirting with recession.
• OECD industrial production in negative territory YoY.
• Southern Europe showing renewed signs of political tensions as unemployment continues its relentless march higher and tax receipts continue to collapse.
• Short-term interest rates almost everywhere around the world that are unable to go any lower, even as real rates start to creep higher.
• Valuations on most equity markets that are nowhere near distressed (except perhaps for the BRICS?).
• A World MSCI that has now just dipped below its six month moving average.
• A diffusion index of global equity markets that is flashing dark amber.
• Margins in the US at record highs and likely to come under pressure, if only because of the rising dollar.

Nothing like good ole' Goldman to brighten up things with a wink and a smile just as the economy is sliding, earnings are retrenching (and declining excluding pension underfunding adjustments), cash flow is negative and revenues are poised to double dip.

Even if the last thing the tapering US "recovery" needed is a surge in energy costs, it may soon be getting them following yet another news flashback, this time to the 2010 GOM disaster. Just headlines for now from Bloomberg:

• U.S. IS RESPONDING TO A LOSS OF WELL CONTROL IN GULF OF MEXICO
• GULF OF MEXICO EVENT OCCURRED AT SHIP SHOAL BLACK 225 PLATFORM
• GULF SITE POSSIBLE SHEEN IS OVER 4 MILES WIDE BY 3/4 MILE LONG
• ENERGY RESOURCES TECHNOLOGY GULF OF MEXICO OWNS PLATFORM: U.S.
• U.S.: COMPANY ASSESSMENT SAYS GAS FLOWING FROM GULF WELL

WTI meanwhile up another $0.70 just shy of $105. Time to rid the world of evil speculators once and for all.

Jeff Gundlach may not be present at today's DoubleLine live webcast titled ominously enough "The End of QE as We Know It", which will be led by the firm's Jeffrey Sherman, but the firm is sure to provide some guidance on how the recent bond rout has impacted bond funds, and what the future of risk duration is in a time when Bernanke seems hell bent on pushing everyone out of bonds and into stocks.

Anyone who followed today's trading action with a very distinct sense of summer of 2008 deja vu dread, where soaring crude led to just one thing, soaring stocks, they are forgiven, because this is precisely how one can summarize today's action. In a day devoid of any news (except for the JOLTS survey of course, which confirmed the gaming of NFP payroll numbers), in which bonds did absolutely nothing, with the 10 Year trading in a very tight range just shy of 2.65%, it was all about low-volume levitating equities and the energy complex.

Yesterday we described the historic inversion in the Gold Forward Offered Rate, where the 1 and 3 Month GOFO rates sliding into negative territory for the first time since 2008 and 1999 respectively. Today, using the latest LBMA rate update, we observe that the gold backwardation is accelerating, and now the 6 Month GOFO has also joined the complex into sub-zero territory.

The U.S. economy weakened appreciably in the first quarter of 2013. But what if this weakness persists into the second quarter just completed, and worsens still in the second half of this year? Q1 GDP, as reported on June 26th, was revised lower to just 1.8%. And various indications suggest that Q2 could come in slightly lower still, at 1.6%. Might the U.S. economy be guiding to a long-term GDP of 1.5%? That’s the rate identified by such observers as Jeremy Grantham – the rate at which we combine aging demographics, lower fertility rates, high resource costs, and the burdensome legacy of debt. After a four-year reflationary rally in just about everything, and now with an emerging interest rate shock, the second half of 2013 appears to have more downside risk than upside. Have global stock markets started to discount this possibility?