Archive - Jan 26, 2015

In a fundamentals-driven market you need to look at fund flows; in a Narrative-driven market you need to look at Narrative flows. With Draghi’s announcement last Thursday, there is no longer a marginal provider of market-supportive monetary policy Narrative. Or to put this in game theoretic terms, the 2nd derivative of the Narrative of Central Bank Omnipotence just flipped negative. We’ve shifted from an accelerating Narrative flow to a decelerating Narrative flow, and that inflection point in profoundly important in game-playing. The long grey slide of the Entropic Ending begins.

Chairman of the Joint Chiefs, General Martin Dempsey has, according to Politico, asked The National Defense University to establish an essay and research competition focused on the Middle East in honor of Saudi Arabia’s late King Abdullah. How very generous for America's top uniformed military leader to recognize such a leader of another nation... Though no details of the prize are available, we thought we would take a stab (figuratively) at an essay...

With earnings tumbling and outlooks collapsing for energy sector names in the US (and worldwide for that matter) there is only one way to keep the "wealth creating" dream alive in stocks... the magic of multiple expansion (or hope over reality). As Factset points out in its latest report, this week marked the first time the forward 12-month P/E for the Energy sector has been equal to (or above) 22.4 since April 8, 2002. What is perhaps even more compellingly mind-numbing is, if analysts were not still projecting record-level earnings over three of the next four quarters (including the downward estimate revisions in the Energy sector), the forward 12-month P/E ratio would be even higher.

It's a common story throughout human history. There’s almost always an elite, or government, with a ‘scarcity’ mentality that believes in the zero sum game, i.e. for anyone to be a winner, someone else has to be a loser. When they’re short of cash, governments almost invariably raise taxes. Of course, the numbers show that raising taxes rarely affects total tax revenue. There’s a very looooong history which clearly establishes this point. And you’d think that a government would look at the data and recognize the obvious truth: their scarcity mentality doesn’t work. But no. Sadly, in the face of such overwhelming data, the Obama administration is now pushing to raise tax rates once again...

Calling all Greeks - now would be a good time to protect your self from TROIKA bail-ins and deposit confiscation. Also, protect against possible return to drachma. Greeks will soon learn value of a real safe haven 

Moments ago yet another industrial bellwether company, United Technologies, which is at the nexus of the building and aerospace industries, reported Q4 EPS and revenues, which missed, but worse, cut 2015 EPS guidance from $7.00 - $7.25 to $6.85-$7.05, blaming FX headwinds. Well, yeah, it's always something. And that something is why 2015 EPS on not only a GAAP but increasingly non-GAAP basis will be lower in 2015 than in 2014. However, while the guide-down means that UTC will soon join the seemingly endless parade of (mostly energy) companies that have laid off employees, there is great news for shareholders. Because even as the company see less growth opportunities and can barely keep up with Wall Street expectations, it has found a great way to reward those who buy its stock: by buying it right back from them.

The more detached from reality American culture becomes the more strictly ceremonial leadership gets, as illustrated by the raft of bromides Barack Obama floated past the assembled vassalage of government last week in another grand effort to avoid the necessities of the moment. Those necessities include freeing a hostage public from the tyrannical clutches of corporate despotism — the evil empire of big boxes, big burgers, big pharma, Big Brother — and the atrocious rackets fostered by them that masquerade as an economy. The template of the life we have known is broken and the pieces within are flying apart, and no amount of wishing or promising can keep them going. If this society is even going to survive, the people have to smash their way out of this template prison, probably against the efforts of the people and organizations now running it merely for their own benefit.

Well things are gonna change in Europe.  Greece just voted in a majority no bullshit government. But what is it that needs to get done in Greece?  That’s really the $64K question.  On the surface it seems as though Greece is simply a bunch of lazy sponges.  But we caution you to look at the facts before making a final judgement.  Remember Greece was once upon a time the genesis of democracy.  These people have been doing democracy longer than any other nation on earth.  And so we have a hard time accepting all of sudden after thousands of years they simply got too lazy to carry on the pride of the people who created the concept of a self-governed and free populace.  We just don’t buy it.  Let’s look deeper...

Well that didn't take long. Russian Finance Minister Siluanov has responded to S&P's "junk" downgrade of The Russian Federation:

• *SILUANOV: S&P DOWNGRADE OF RUSSIA SHOWS 'EXCESSIVE PESSIMISM'
• *SILUANOV: NO REASON TO EXPECT `MASS' DEBT REDEMPTION REQUESTS

Adding in his statement that he "sees no reason to dramatize" the situation, Siluanov adds that the cut should not have any serious effect on Russia's capital markets. We assume by "dramatize," he means - they wil not be 'visiting' the local ratings agencies offices for a chat anytime soon.

"Gold is consolidating before its larger bull trend resumes," notes BofAML's MacNeil Curry looking for a move to $1345 and beyond. But it is today's modest bounce in EURUSD that they believe should be sold, and "seen as temporary and corrective of the larger bear trend."

Federal prosecutors in New York charged three men in an alleged Russian spy ring centered in Manhattan and the Bronx, according to a Jan. 23 complaint unsealed today by the office of Manhattan U.S. Attorney Preet Bharara. According to CNN's Shimon Prokupecz, Evgeny Buryakov, working with Igor Sporyshev and Victor Podobnyy, was trying to recruit NYC residents as intelligence sources for the Russian Federation.

The Greek election result was worse than expected - the anti-austerity vote is massive, but it could be an empty gesture as Greece in reality has little choice: Comply with the Troika or leave the EUR. Saxo Bank's Steen Jakobsen doubts the latter will happen with the same vote as the Greeks are tired of austerity but not of being European. However, game theory dictates that some solution will be found which is sub-optimal for all parties, but the risk it will take longer than market have nerves for. There remains a consensus that “things will be ok...” but the early comments indicate the positioning is already starting...

Just because we enjoy collecting snippets of soundbites and information, especially when the originators of said soundbites do a U-turn a few weeks later, here are the first two "timestamps" regarding the impact of what may be the biggest blizzard (and certainly one of the Top 5) in New York city history.