Archive - 2014

Emerging Market equities have tumbled over 4% in the last 2 days on heavy volume. The last time the world experienced a major Emerging Market meltdown, the US was still by far the world's major 'consumer'. However, as the following chart from JPMorgan shows, that is very much not the case anymore and the last few days ugly echoes of the mid-Summer Taper Tantrum in Emerging Markets (most notably Asia), while being shrugged off by most, may be much more important to any sustained global recovery than your friendly local asset-gatherer would ever care to admit.

At this point, the problem of hitting limits in a finite world has morphed into primarily a financial problem. Governments are particularly affected. They find that they need to borrow increasing amounts of money to provide promised services to their citizens. Debt is a huge problem, both for governments and for individual citizens. Interest rates need to stay very low, in order for the current system to “stick together.” Governments are either unaware of the true nature of their problems, or are doing everything they can to hide the true situation from their constituents. The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last?

Presented with little comment, as the chart speaks for itself, but for those greatly rotating their 'cash on the sidelines' into stocks; JPMorgan points out that US equities are 2 standard deviations rich to their average valuation and are in fact the most expensive in the developed world...

What if our commoditized, financialized definition of wealth reflects a staggering poverty of culture, spirit, wisdom, practicality and common sense?

As we reported earlier, 1.5 billion adults around the world, or a whopping one in three, are obese or overweight. But, as any marketer will tell you, this is merely an untapped opportunity: it simply means that two out of three are still "unobese". And doing its best to hit the goal of 100% obesity, is IHOP which, for the first time in more than two years, has just unleashed Pancake Pandemonium: "You can choose a stack of five Buttermilk pancakes as a main course or you can opt to add them to a combo which features eggs any style, hash browns, and a choice of pork sausage links, bacon, or ham." Remember: "With authentic country flavor, our fluffy buttermilk pancakes are the signature favorite we’re famous for. Order early and often—All-You-Can-Eat Pancakes are unlimited!"

As the New Year brings the actual implementation of Obamacare, it appears in reality things are not as great as many were promised. A recent Gallup survey found that only 7% called their Obamacare experience "very positive" with a stunning 29% seeing it "very negative." But as The Daily Mail found, from Northern Virginia hospitals turning away sick people because they can't determine whether their Obamacare insurance plans are in effect to high deductibles and long waits for authorizations; as many as one-third of the administration's claimed 2.1 million enrollees remain unsure of their coverage. The 'lie of the year' in 2013 may be even bigger in 2014.

The start of 2014 was less than exuberant as the markets turned in the steepest loss for the first trading day of a new year since 2008.  What does this mean for the rest of 2014?  Likely not much.  The old Wall Street axioms of "the first 5 trading days" and "so goes January, so goes the year" tend to be statistically more important.  However, it did get me thinking about the new year from a more macro perspective.  This weekend's "Things To Ponder" is a collection of ideas to get you to do the same.

The weakness in stocks accelerated after Europe's close, was briefly stalled by algo wildness and VWAP buys on Bernanke's completely non-news speech this afternoon, then dropped into the close, but was far outweighed by the moves in commodities. WTI Crude has dropped over 6% in the last 4 days - its biggest such drop in almost 8 months. The last 2 days have seen gold rise at its fastest pace in almost 3 months. Treasuries ended the week practically unchanged with a modest selloff on Bernanke leading to a 2-3bps drop in yield sin 2014 so far. The USD kept soaring on the back of EUR weakness (as the liquidity flows came back out) but JPY was in charge of ferrying stocks once again (until the last few minutes). The Bernanke VIX slam failed to ignite any real momentum and stocks slipped into the close - with the NASDAQ ands SPX red (but Dow green). Of course, POMO restarts next week so shorting will be banned...

From ironic to ironic-er... the Chinese icebreaker ship that helped rescue the 52 Australian global warming researchers from being trapped in Antarctic ice has found itself stuck in heavy ice. As Reuters reports, The Snow Dragon had ferried the passengers from the stranded Russian ship to an Australian icebreaker late on Thursday. It now had concerns about its own ability to move through heavy ice, the Australian Maritime Safety Authority (AMSA) said.

Oops. While Phil LeBeau was proudly crowing about how great the auto industry 'was' doing, the actual data of how it 'is' doing printed with a dismal drop from Novermber's exuberance. Domestic Sales dropped to their lowest annualized level in 14 months with the biggest miss since Oct 2008! The story was very widespread, as SMRA notes, nearly ever automaker reported lower than expected sales... apart from: *MASERATI N.A. DEC. SALES UP 210%

Looks like he's still got it... (or the NY Fed Trading desk wanted to send him off with a smile on his face...)

Good riddance to the original snow job...

Ben Bernanke will momentarily speak at the American Economic Association symposium in Philadelphia. His speech is titled "Looking Back, Looking Forward" and can be found at the end of this post.  Watch what may be his last speech live.