Archive - Nov 18, 2015

Even if nothing else doomed the status quo, the widening gap between household incomes and costs will push the corrupt contraption over the cliff by itself. The status quo (whatever you wish to call it) requires "growth" to sustain itself--growth in consumption, spending, sales, debt, asset valuations, profits and of course taxes, and ultimately all of those "growths" depend on household incomes. Incomes even for the most highly educated workers are stagnating..

Perhaps even more stunning than the photo of the alleged bomb contained in a beer can, which ISIS says was used to blow up the Russian airplane, is its admission that it would have used the explosive  to bring down "a plane belonging to a nation in the American-led Western coalition against the Islamic State" only to change its mind in the last minute.

"The signals across asset classes are diverging incredibly," warns Macro Risk Advisors' Dean Curnutt, "and we should all be afraid." All of that commodity volatility is rolling back into corporate credit and that, inevitably will dramatically impact equity markets (explicitly through higher funding costs weighing on earnings or implicitly through lower buybacks and higher risk premia), "the illiquidity and implied defaults that we are seeing in credit markets are not at all priced into a 2060 S&P."

Presented with no comment...

Following President Obama's 'promise' this morning to "provide refuge to to at least 10,000 refugees fleeing violence in Syria over the next year after they pass the highest security checks," we thought some help with the "highest security checks" form may be helpful...

Apparently, once Moscow got confirmation that the Russian passenger jet which went down over the Sinai Peninsula earlier this month was indeed destroyed by a bomb, The Kremlin decided to show ISIS what "bombs" really look like.

While await a full blown European version of the Patriot Act, we can say that the second part of the forecast just came true, because this morning The European Commission announced it had adopted a package of measures to strengthen control of firearms across the European Union and meant simply to make it "difficult to acquire firearms."

...or to put it another way, here is what Deutsche Bank believes are the only two "upside risks" for markets - "a smooth start to Fed tightening" and "eurozone growth surprises to the upside." Other than that, hope that The Fed reverts to old norms and eases, un-tightens is the last best hope for this decoupled, divergent equity market...

According to Reuters, the suspects targeted in a pre-dawn raid in France were planning to attack the Quatre Temps on Thursday, the busiest mall in France located in the business district at La Defense. Meanwhile, WaPo, citing European intelligence officials, says Abdelhamid Abaaoud was killed in Wednesday's operation.

Perhaps notably, despite an initial kneejerk higher, US equities remain below the levels seen when The FOMC Statement was released in October. Gold, The USDollar, and bonds are all modestly higher post-FOMC Minutes... Some might suggest the long-end is pricing in a "policy error" as on the day 30Y is down 2bps while 2Y is up over 2bps.

"Federal Reserve officials meeting last month anticipated it “could well be” time to raise short-term interest rates at a December policy meeting after keeping them pinned near zero for seven years. Fed officials thus decided to change the wording of their Oct. 28 policy statement to ensure their options were open for a move in December, according to minutes of the October meeting released Wednesday with the regular three-week lag."

With everything red since the October 28th "hawkish" FOMC meeting - which greenlit a December rate hike and convinced the world that everything is awesome in America (well why else would The 'smart' Fed raise rates?) - today's minutes suggest an FOMC that is perhaps not quite as "whatever it takes" committed to a December liftoff...

• *FOMC MEMBERS WANTED TO CONVEY DEC. LIFTOFF MAY BE APPROPRIATE
  
• *SOME FED OFFICIALS: UNLIKELY LIFTOFF CONDITIONS MET BY DEC.
  
• *FED OFFICIALS SAID ACTUAL LIFTOFF DECISION TO DEPEND ON DATA

But bear in mind there is a lot of data between now and December 16th (including payrolls) and what if stocks drop? Pre-Minutes: 68% rate-hike odds, S&P Futs 2064, 10Y 2.28%, EURUSD 1.0640, Gold $1070, WTI $40.45

Just three weeks ago we warned of "all kinds of mayhem" about to be let loose as scientists feared this year's El Nino may be among the biggest ever, and as Bloomberg reports, the impact is already being felt in California... but not in much needed rain or snow. California has yet to see the full force of El Nino, and it’s already tripping up the state’s power-demand forecasters. The state saw "significant" electricity price spikes in the third quarter as El Nino made it difficult to predict how much power would be needed with a "relatively high percentage of intervals" when prices spiked above $1,000 a megawatt-hour in the 5-minute market... 25 times normal costs!