Archive - Jan 2, 2015

Not decoupling-er. Completing this morning's triple whammy of ugliness, US construction spending in December dropped 0.3% (against expectations of a 0.4% rise) - the biggest monthly drop since June. On the back of a crash in new orders from 66.0 to 57.3 (and prices paid plunging to 30 month lows), ISM Manufacturing also tumbled from 58.7 to 55.5 - its lowest since June (missing expectations by the most since January). Unable to find a silver lining, ISM's Holcomb proclaimed "comments are a 'bit mixed'".

So much for that whole "decoupling" meme... Just as China and then Europe saw weakness in their manufacturing PMIs, so the US data just hit, printing 53.9 (missing expectations modestly) and falling for 4 straight months to the lowest since January 2014's Polar Vortex. Production volumes are also the weakest since Jan 2014 and the employment sub-index collapsed. Markit warns, "this suggests a slowdown could become more entrenched."

How do you say Japanization in German? 5Y German bonds just traded at -0.1bp yield (below Japan's 3bp 5Y yield)...

Stripped of accounting gimmicks, earnings are overstated by 86%. This means the S&P 500 is sporting a REAL P/E of over 30. So much for the argument that stocks are cheap.

The total and utter farce of European sovereign bond yields continues to accelerate on yet another round of rhetoric designed to entice yet more domestic financial institutions to monetize yet more domestic sovereign debt on to their delapidated deflation-devastated balance sheets and 'swap' with the ECB for freshly printed liquidity. As Central Bank front-runners, front-run each other in a race to the bottom, the rapidly Japan-ized EU bond market has seen risk (spread 10-20bps lower) tumbles and yields crash to new record lows this morning. EU bond yields have fallen for 3 years and the economy has cratered... so what is the purpose of ECB QE?

How to find the safe haven heading into 2015....GOLD, $USD

Don't listen to or become entrapped by financial advisors offering some great skill, in knowing the guide path for various asset prices, and therefore can guide you in when to buy and sell certain securities.  It's their only job to simply sell as much insane fantasy as possible, to anyone willing to buy.  And it's those same advisors -frenzied by their battalion of technology resources- who are likely uneducated on the lessons contained in the straightforward story about the Grinch, to provide a better light for anyone in their winter voyage ahead.

Reading headlines and social media commentary in last night's thin trading, one could have been excused for thinking the collapse of global crude oil prices was over and a new renaissance had begun as 'watchers' proclaimed WTI's spurt above $55 (for a nanosecond) as indicative of the lows being in. However, just hours later, following weak European data (and a recognition of massively offside speculative positioning), WTI has collapsed over $3 from the highs and is testing towards a $51 handle.

• The year of dollar danger for the world (Ambrose Evans-Pritchard)
• Draghi Says ECB Prepares Action as Deflation Risk Non-Negligible (BBG)
• Obama Pivots to Lawmakers: New Plan to Advance Policy Goals by Working With Congress Draws Skeptics (WSJ)
• Affordable Care Act Creates a Trickier Tax Season (WSJ)
• Oil pares early gains, trades near $57 as supply glut prevails (Reuters)
• Iran says Saudi Arabia should move to curb oil price fall (Reuters)
• Pimco Fund Trails Peers in 2014 After Missing Rally (BBG)
• Piketty rejects Légion d’Honneur award (FT)
• UK manufacturing activity hits three-month low (BBC)

The new year has officially started because it wasn't even a day in and Mario Draghi was once again out and about, jawboning the Euro to a lower level than where it was when he said back in 2012 he would do "whatever it takes" to push it higher. The reason, as Reuters reports, why the Euro sank to a nearly 5 year low against the USD, was "clear indications that the European Central Bank will soon embark on outright money-printing." Actually, it was on just more hollow rhetoric by Draghi, who told German Handelsblatt that "the risk that we don’t fulfill our mandate of price stability is higher than it was six months ago." He also added that "it’s difficult to say” how much the institution will have to spend on government-bond purchases.