Archive - Jan 29, 2015

Alibaba is down over 10% this morning following a disappointing earnings release. This comes on the heels of selling pressure after the Chinese government released its report claiming significant "issues" at China's richest man's company. A combination of weak revenues, a 28% plunge in net income, slower than expected growth on its Tmall platform (and disappointment at the progress into mobile advertising) have sent the stock tumbling back near Facebook's market cap.

If, as Kyle Bass so eloquently noted previously, "buying gold is just buying a put against the idiocy of the political cycle. It's That Simple," then recent (post-QE3) activity suggests the narrative is changing fast... Perhaps Larry Summers was right last week in Davos, "we have to recognize that the era when central bank improvisation can be the world’s growth strategy is coming to an end."

How will the FOMC handle the rate environment? What's the impact from Alibaba's Miss

After 4 weeks missing expectations (and 3 above the crucial 300k mark), initial jobless claims totally and iutterly collapsed last week. Printing 265k (beating the 300k expectation by the most in years), the 13.9% drop WoW was the biggest since September 2005!!! This is the lowest initial claims data since the financial crisis and in fact the lowest since April 2000. But it is the story from the Shale states that is most troubling as initial claims through the 2nd week of January (data is lagged by state) show a massive surge in initial claims as unambiguously good news is very much not for many thousands across these regions.

"Officials at the Federal Reserve – the most powerful and strongest of Parker Brothers – seem to now appreciate the hole that they have dug by allowing interest rates to go too low for too long.... While there is no better system than capitalism, it is incumbent upon it and its policymakers to promote a future condition which offers hope as opposed to despair. Capitalism depends on hope – rational hope that an investor gets his or her money back with an attractive return. Without it, capitalism morphs and breaks down at the margin. The global economy in January of 2015 is at just that point with its zero percent interest rates."

For the first time since October 2009, Germany saw Consumer Price Inflation fall in January. Missing expectations for the 2nd month, Germany's deflationary 0.5% drop in CPI is the worst deflation since July 2009 and comes just 3 weeks after Europe broadly entered the dreaded deflation spiral of doom so many status quo economists are terrified of. Just a good job Draghi unleashed Q€ ... oh wait inflation expectations have tumbled since then too...

For those keeping track of currency wars around the globe, 2015 - a year in which two central banks, those of Switzerland and Singapore have already admitted defeat, is shaping up as nothing short of historic. As DB's summarizes: just about 31 countries have, in less than a month, eased in the form of 13 mostly "surprise" rate cuts, while just 5 have tightened monetary policy.

• Who Doubts Yellen's Policies? Summers for One (BBG)
• Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
• Islamic State purportedly sets new deadline for hostage swap (Reuters)
• Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
• How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
• U.S. Prisons Grapple With Aging Population (WSJ)
• Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
• Belarus May Seek Debt Restructuring in 2015, President Says (BBG)

The bottom line is that unfortunately for the BTFDers, with the Fed no longer giving explicit buy signals with the "considerable time" language struck, and with an implicit economic upgrade suggesting a rate hike is still on the table, it is becoming increasingly more difficult to frontrun the Fed's "wealth creation" intentions.