Archive - Oct 15, 2015

Brazil's economic recession is likely to be deeper and longer than Fitch's earlier expectations and its performance has diverged materially from those of its rating peers. Medium-term prospects also look weak compared to peers and most other large emerging markets. Fitch forecasts that Brazil's economy will contract by 3% and 1%, respectively in 2015 and 2016 before recording modest growth in 2017, with risks skewed largely to the downside.

Remember the relief? The last 4 weeks have seen Bloomberg's Consumer Comfort index rise at the fastest pace since its "Off The Lows" move from March 2009... The driver, apparently, was women whose comfort rose from 41.6 to 43.0 as men dropped from 48.2 to 47.6; and while "white" people's comfort dropped from 45.3 to 44.5, "black" people surveyed saw a huge jump from 40.3 to 45.9 in their comfort.

Correlation? Or Causation? You decide...

“The trend in our projected net resources has continued to be negative," warns Treasury Secretary Lew forcing the administration to move up the deadline for the end of extraordinary measures from Nov 5th to Nov 3rd.

While the September Consumer Price Inflation report was in line with expectations, with the headline CPI declining -0.2% in the month - the biggest monthly drop since January - and unchanged from a year ago, just as consensus predicted, it was all about the core CPI where attention was focused, and especially one item: rent, which rising at 3.7% Y/Y is now the hottest it has been since the fall of 2007.

After collapsing in August and unable to get up in September, October's Empire Fed bounced very modestly from -14.67 to -11.36 (but missed expectations for the 7th month of the last 8). This is the first time since 2009 that Empire Fed has printed below -10 3 months in a row putting The US firmly in recession territory, the underlying components were ugly with New orders crashing at the fastest pace since Nov 2010. Employees tumbled (as did inventories, although the plunge slowed) with prices received plumbing new cycle lows. In other words, total disaster... time to hike rates.

The “smart money” and by that we mean the more informed, aware and prudent investors and institutions internationally continue to have an allocation to gold and or add to existing allocations. The less informed continue to not understand or disparage gold and focus almost solely on gold’s short term price action rather than gold’s long term attributes as a hedging instrument and a safe haven asset.

The yawning gap between job cuts (surging most since 2009) and initial jobless claims (hovering near 42 year lows) continues to grow as initial jobless claims collapse 7k this week to 255k - the lowest since 1973. Bear in mind, Goldman's explanation that jobless claims are useless in this part of the business cycle..."this does not signal a booming labor market."

Once again, Jefferies' one-month early glimpse at Wall Street trading revenues proved to be spot on. After the boutique mid-market banks reported a total collapse in fixed income trading revenues (which ended up negative following massive charge offs), everyone was looking at the biggest hedge fund among the TBTF banks - Goldman Sachs - to see just how bad the trading environment really is. The answer came moments ago, and the answer is bad. Very bad.

• China economic growth seen slowing despite policy easing (Reuters)
• FBI, Justice Department Investigating Daily Fantasy Sports Business Model (WSJ)
• Obama to slow pace of withdrawal of U.S. troops from Afghanistan (Reuters)
• Corporate America's Epic Debt Binge Leaves $119 Billion Hangover (BBG)
• Islamic State battles insurgents as Syria army prepares assault (Reuters)
• Why Hillary Clinton Can’t Win by Going After the NRA (BBG)

Back on September 28, when the specialty biotech drug scandal was just getting started and leading to a biotech bear market, Valeant stock suddenly plunged $50 leading to massive losses for its top holder Bill Ackman when it was revealed that House democrats had requested a Valeant subpoena. To be sure, the company promptly made it clear that an official subpoena had not actually been sent, just that some politicians were demanding one. That changed overnight when Valeant issued a press release providing an "update regarding government inquiries", in which we learn that the subpoena is now official.

Aside from Chinese monetary data, it was a relatively quiet session in which traders were focusing on every move in the suddenly tumbling USD, and parsing every phrase by central bankers around the globe, as well as the previously noted piece by Fed mouthpiece Jon Hilsenrath which effectively ended the debate whether there will be rate hikes in 2015. Adding to the overnight froth were ECB speakers first Ewald Nowotny and then Spain's Restoy, who said that euro-area core inflation "clearly" below goal, remarks which were immediately assumed to signal increasing pressure to boost stimulus, and which promptly translated into even more weakness in EUR and equity strength, pushing US futures up about 15 points from yesterday's close.

Most Americans Think Government Corruption is Biggest Problem