Archive - Dec 2014

The cards in this deck are not aligned the way they were a half-year ago. An Obama veto of Keystone is no longer a sure thing. Proving once again that crude prices have strange bedfellows.

A different view on a tough market...

The Federal Reserve and its owners print and party, while the rest of us work and weep..................

The cult of egalitarianism demands equal treatment of unequal circumstances, a model that can lead only to tyranny and oppression. We have to stop thinking of equality as a necessary feature of a healthy society. The only sense in which people are truly equal is in their right to life and the control of their own actions. Any interference with these must be closely guarded against, but the politically correct imposition of equal outcomes on diverse personalities destroys individualism and abolishes freedom.

Having raised money at a mind-numbingly bubblicious $40 billion valuation this week (which as a reminder is triple the value of the entire NYC tax medallion business), we thought the pushback from the world's tax-driving unions was at least worth noting as they resist 'disruption'. Nowhere is that pushback more evident than in Greece, where as KeepTalkingGreece reports, the President of Attica Taxi Association (SATA) said that taxi drivers cooperating with Uber “should be hanged at Syntagma Square” for being traitors.

Presented with no comment...

Much has been said about Goldman's control over the most important Federal Reserve of all, that of New York, where the all important Markets Group is located, which does as the name implies, "influences" markets.And while it is very clear by now that nothing will change under the current corrupt and compromised executive, legislative and judicial system, because at the end of the day, Goldman has indirect control over all three branches of government , here is the one anecdote which, in a non banana republic, would be the straw that finally broke the camel's back.

We don’t see a whole lot of comprehension out there, so let’s try and link the obvious: employment to shale to plummeting oil prices to the debt the shale industry was built on (and which is vanishing). We know, people look at the US jobs report yesterday, and at the stock markets (Europe up some 2% across the board), and think salvation has landed on their doorstep, but the true story really is very different. We’ve been saying for weeks that lower oil prices would not be a boon but a scourge for the US economy, for several different reasons, and this is a big one. The losses to investors, the restructurings and bankruptcies, and perhaps even the bailouts, are a very much interconnected and crosslinked other. There’s no resilience – left – in a system like this, it bets all on red, and that makes it terribly brittle.

Despite the near-record scream higher in Chinese stocks over the last few months, under the surface China is rattled and nowhere is that more evident than in the collapse of its commodity-backed ponzi-financing deals. Since we first uncovered the fraud at the port of Qingdao, another has appeared that is just as fraud-ridden - Penglai; and Citi and Mercuria Energy are arguing over who pays. According to Mercuria's lawyer Graham Dunning, Citi was "in a state of panic," when they uncovered the fraud. As Bloomberg reports, Dunning exclaimed "it appears that substantial quantities may be missing from the warehouses or may be the subject of multiple pledges," and the bank says it is owed at least $270 million. Other 'banks' have been less forthcoming about their potential losses, but the government probe has so far uncovered almost $10 billion in fraudulent trade, including irregularities at Qingdao, according to the country’s currency regulator.

The investment game is becoming more suspect and dangerous as asset price levels continue to ignore economic weakness and the lack of necessary political reform.  Instead, many investors (not just in the EU) have become conditioned like B.F. Skinner rats to bid up financial risk assets whenever a central banker makes a promise about accommodation or further stimulus; this even occurs when data disappoints, because investors expect ‘the promise’ to soon follow. Fear of missing the upside and underperforming peers and benchmarks is what makes this reflexivity work.  This is actually a sad state of affairs and an ever-more dangerous and epic game of chicken.  This conditional response pattern is unsustainable.  Indebtedness and market speculation continue to soar.  In the end, printing is a not a solution, but a source of long-term harm to markets and national economies.

Not "off the lows"...

Who says the US president is unwilling to suffer great discomfort and intolerable pain in the pursuit of his noble, "leader of the free world" duties? Not flashing red headlines informing us about the constant state of the president's frail laryngeal area, that's for sure. From Bloomberg:

• PRESIDENT OBAMA SEEKING TREATMENT FOR SORE THROAT, DOCTOR SAYS

And while the social media has been lit ablaze with alternative "theories" that may have caused Obama's throat discomfort, please join us as we observe a minute of silence in awe of America's suffering president.

There are a hundred flashing red warning signs coming to us from the environment, the Earth, and all of its supporting ecosystems. Either we get off the 'growth at any cost' express train or we risk wrecking important, valuable, essential and beautiful species, ecosystems and support systems that we rely upon for our health, our wealth, and our happiness. Like the economy, ecosystems are complex systems. That means that they owe their complexity and order to energy flows and, most importantly, they are inherently unpredictable. How they will respond to the change by a thousand rapid insults is unknown and literally unknowable.

It was just one short month ago when, on the back of the soaring dollar (which has since soared even more), as well as "diminished global GDP growth and lower crude prices", Goldman's David Kostin cut his EPS for 2015 and 2016 from $125 and $132 to $122 and $131. Then, it was just two short weeks ago, the same David Kostin said "we expect the P/E will contract and the index will slip during the second-half of 2015 as the Fed takes its first step in the long-awaited tightening cycle. Our S&P 500 year-end 2015 target of 2100 implies a modest 5-10% P/E multiple compression to 16.0x our top-down 2016 EPS estimate or 14.6x bottom-up consensus earnings estimates." And then, with the S&P now about 20 points away from Goldman's 2015 year end target (and just 120 points from the government-backed hedge fund's 2016 year end target!), the very same David Kostin admits that he was only kidding and that the S&P may in fact rise to a whopping 2300 in the coming year...