Archive - Nov 14, 2014

The USD seemed to get a sudden flush at 10am, which sparked bond (10Y -3bps), stock (S&P +5pts), and gold buying (up over $15).... no catalyst as far as we can see other than UMich inflation expectations plunging...

Three important factors which should support gold above $1,100/oz are Chinese demand, central bank demand including from Russia and of course the Swiss Gold Referendum. We remain bearish in the short term but very bullish for 2015 and in the coming years.

Last month's 7-year high UMich consumer confidence came amid an Ebola scare and collapsing stock market...with surveyers actually noting their own surprise, "it would be surprising if recent declines in household wealth did not reverse some of the recent gains in optimism in the months ahead." So when November's preliminary print hit 89.4 - smashing expectations of 87.5 - to its highest since July 2007. For the first time since Dec 2011, UMich has risen 4 months in a row. The main driver of the exuberance is 'current conditions' which surged to 103 - the highest since Jul 2007 as the outlook barely budged. However, despite Bullard's comments about a rebound in inflation expectations, with 5Y expectations collapsing to the equal lowest since Sept 2002.

With Apple at record highs, its market capitalization is now bigger than Russia's entire stock market (the 20th largest market in the world). What's more, as Bloomberg notes, there would be enough money left over after selling Apple and buying Russia to purchase over 190 million contract-free 64Gb iPhone6 Pluses (enough for every Russian).

Rumors that the US may be rapidly losing its drone and "military advisor"-based war against ISIS (and expensive oil) may not be greatly exagerated, but it doesn't mean the US is out of ideas. Here is the White House's latest "strategy pivot."

Isn't it amazing what 2000 Dow points will do to a Federal Reserve member's perspective of 'the economy' and 'inflation expectations'. Bullard is back again today:

*BULLARD: INFLATION EXPECTATIONS REBOUNDED SINCE MID-OCTOBER
*BULLARD: FED TO RAISE RATES IN 2015, TIMING DETERMINED BY DATA

So basically calling off QE4 until the next 9.9% correction... Dow-Data-Dependent indeed

Greece - it would appear by this morning's GDP print - is now the engine of growth for Europe. Despite near-record unemployment, record suicides and poverty, and an increasing number of Greeks doing unpaid work (or in slavery), GDP rose at the fastest rate across the EU... However, it appears, judging by the protests across Athens today, the people did not get the message that the crisis is over... as police resort to tear gas and stun guns.

Retail Sales headlines, sliced and diced whichever you like, modestly beat expectations. Ex Autos & Gas, retail sales rose 0.6% against an expectation of a 0.4% rise as falling gas prices provided some support for sales. However, more troubling for the US economy is the 1.6% tumble in 'electronics and appliances stores' sales. This is the biggest MoM drop since Dec 2013. The big question is "are iPhones part of the 'electronics and appliances stores' category?"

Ah Europe, never change.

• "The hate us for our..." Americans’ Cellphones Targeted in Secret U.S. Spy Program (WSJ)
• Ukraine and Russia take center stage as leaders gather for G20 (Reuters)
• Moscow and Kiev trade accusations; U.S. warns Russia against escalation (Reuters)
• Heartland Central Banker Calls Asset Bubbles Top Concern (BBG)
• U.S. Said to Give Banks December Deadline in FX Probe (BBG)
• Series of Failures Enabled White House Breach, Report Finds (WSJ)
• Yen plumbs seven-year trough on likely Japan sales tax delay (Reuters)
• JPMorgan Chase Bankers Said to Lead Moscow Departure (BBG)

PIMCO PAID GROSS $290 MILLION BONUS FOR 2013, DOCUMENT SHOWS
PIMCO PAID FORMER CEO EL-ERIAN ABOUT $230 MLN BONUS IN 2013

The key event overnight was the release of European Q3 GDP data, which saw Germany averting a recession by the narrowest of margins when following a -0.2% drop in Q2 economic growth, Germany grew by the smallest amount possible in Q3, or 0.1%, in line with expectations, thus averting two consecutive quarters of decline, the technical definition of a recession. The French economy likewise posted a modest increase in Q3, although one wonders how aggressively the data had to be fudged for a country whose PMIs all indicate a -1% or greater contraction. Italy however was less creative with its use of "hookers and blow", and continued its recession with a 3rd negative print, contracting at -0.1% as expected, while Portugal also missed third quarter growth estimates.