Archive - Oct 14, 2015

Stephen Hawking has been outspoken in recent years about the catastrophic dangers humanity faces in the 21st century. He said we should be cautious in attempting to contact aliens, warning that advanced extraterrestrial life may not be friendly toward us and could destroy the human race. He also stated we should be cautious in creating strong artificial intelligence. But recently, Hawking addressed the threat he says may be more far more dangerous to the future of human civilization than robots, aliens, or quantum particles: capitalist greed.

As Rousseff fights to keep the Presidency, and has the speaker of the House battles to have her impeached, the country's economy continues to crumble. Retail sales came in below expectations for August and as Bloomberg reports, Brazil's top bankers now fear the combination of overindebted households and soaring unemployment could spell doom.

If we, and Bloomberg, are correct, and if the CFD unwind has only just started impacting the true supply/demand dynamics, and thus price, of copper, then we are only 30% of the way through the unwind of China's copper "carry trade" and thus the 'over-capacity' concerns are massively under-appreciated.

Three years after Obama signed the JOBS Act and the regulation so many people consider to be “the game changer” – the one that will “democratize capitalism” by letting the average Joe invest in private companies – has yet to see the light of day.

Never in history has the US entered a recession when rates were this low. And it spells serious trouble for the financial system going forward.

"You thought it was safe to drive 90 miles an hour on a rain-slicked narrow road while you were tipsy because the airbag would save you, but it still hurts when you crash." This is the Paradox of Risk: the more risk is apparently lowered, the higher the risk we are willing to accept.

Way back in June we documented the “curious” case of Sweden’s broken QE and when we used the term “broken”, we didn’t just mean that inflation expectations weren’t moving higher. We meant that bond yields were rising as the adverse impact from the illiquidity "premium" surpassed the price appreciation benefit from frontrun central bank buying. Fast forward three months and Sweden looks set to “solve” the broken QE problem and by extension ensure it can stay in the currency war games by expanding the list of eligible assets to muni bonds.

Hedge fund manager wonders: what happens to the petrodollar as the "sub-prime of this decade" goes up in flames?

Venezuela’s economy is in desperate trouble. The country is highly dependent on oil reserves and has no significant substitute for black gold in the near term. That reality makes Venezuelan President Nicolas Maduro’s recent efforts to tout the country’s technology industry laughable.

"As allied countries wouldn’t tolerate arms shipments to groups affiliated with al-Qaeda, Turkey definitely can’t accept weapons aid to groups linked to PKK."

Earlier today the largest U.S. mortgage lender Wells Fargo reported results that beat expectations by the smallest possible increment. What caught our attention, however, was the fuel that keeps Wells Fargo's engine humming: mortgage applications. Unfortunately for the housing bulls, there was no good news here because after rushing higher in early 2015 on the latest false hope of an economic recovery or due to fears rates are rising, Wells' mortgage applications and the associated pipeline have declined ever since.

AAPL shares are down 1.75% this morning - the biggest loss since September - sending the "no brainer" stock price back into the red for 2015. Having been unable to break resistance at the 50-day moving average, and with AAPL back under $110, we are sure investors will be "swapping" their stock certificates for iPens.

Business Inventories were unchanged in August (less than the expected 0.1% rise) with manufacturers down 0.3% - bad for Q3 GDP but Business Sales tumbled 0.6% MoM (the biggest drop since January), down across the board. So clearly no inventory liquidation has started yet (so the pain is yet to come) and this has driven the inventory-to-sales ratio up to 1.37x - the highest in this cycle. The last 2 times the ratio was at this level, the US was in recession.

For the first time since September 2013, The USD Index just signalled a "death cross." Three of the last four times that the 50-day moving-average crossed below the 200-day moving-average, The USD Index tumbled significantly.

If the aim of The Fed's communication strategy was to convince the market that rates will not rise for a very long time... then they have been successful. Just as Goldman Sachs forecast, a US rate-hike is now extremely unlikely before March 2016 and falling fast. In fact, all of the major regions are seeing the market's implied number of months until a rate-hike rising rapidly.