Archive - Nov 2015

The world is changing in so many ways which is ignored by markets and commentators. The Paris event is yet another wake up call for the markets on geopolitical risk, for the under-investment in education and basic research, but most importantly for how we continue to ignore facts. First it will get worse... we are simply not prepared for geopolitical risk to matter for markets neither are we yet willing.

In the face of a collapse in the conference board confidence and ongoing weakness in Bloomberg's consumer comfort index, UMich confidence rose on the month to 91.3 (despite fading from its flash 93.1 print). While baffle 'em with bullshit continues, we note that Democrats and full-time workers confidence is lowest in at least a year.

Following US Manufacturing PMI's tumble to two year lows, amid slowing new orders and employment, Markit reports that US Services PMI rose to 56.5 - its highest since April. Amid a solid increase in job creation (low-paying compared to the job weakness in manufacturing) and improvement in business growth, the divergence between Services & Manufacturing is at its highest since Q3 2013 which presaged a complete collapse in Services.

After tripling down on Valeant by way of a synthetic short as we noted previously, which pushed Ackman's long to a grand total of 34.1 million Valeant shares, all it takes for Ackman to generate $100MM in paper losses is a modest $3 move lower in Valeant stock, which is what it has done this morning following a new report by Bronte Capital alleging that Valeant is still back up to its specialty pharma gimmicks, only this time instead of a "chess" theme, the Canadian company is using a cluster of pharma names linked to Stephen King books.

Despite weaker home sales, tumbling homebuilder confidence, and fading median home prices according to NAR, FHFA reports home prices in America rose 0.8% in September. Doubling expectations of a 0.4% rise, this is the biggest MoM price increase since March 2013's peak.

While initial claims collapsed 11k to 260k, practically cycle lows and the hovering at the lowest level since 1973. But in continuing claims, something is different. The last 4 weeks have seen continuing claims rise 2.85% - the fastest pace of increase since July 2013. Of course, none of that matters with a Fed set on hiking rates no matter what, but it is seasonally aberrant to see a surge of this scale this time of year.

"This is legal?" Stephanie Ruhle on CDS after watching "The Big Short" (Bloomberg TV) 

If this data is accurate, and keep in mind the BEA has a habit of revising spending higher after it revises income, to "boost" GDP as we revealed last year, this means that the US consumer is hunkering down at an unprecedented pace, and the 5.6% savings rate is now the highest since 2012, suggesting not only are US consumer unwilling to spending much money, but are actively worried about what is coming just around the corner.

For the 7th month in a row, Durable Goods New Orders fell year-over-year (down 1.0%). This has not occurred without a recession. While MoM the headline number rose 3.0% (beating the 1.7% rise expected), it appears driven by another one-off surge in Boeing plane orders as Capital Goods Shipments Ex-Air fell 0.4%. Finally, the inventory to shipments ratio re-accelerated in October, back near cycle highs.

With the ECB's December meeting just one week away, Mario Draghi and co. are still debating how best to package a new round of easing measures. As Reuters reports, the central bank is considering a tiered system for the application of negative rates in an effort to mitigate the effect on banks. Translation: the ECB may be preparing to "overwhelm" with an even larger cut to the already negative depo rate that analysts were expecting.

Well if that doesn't stimulate aggregate demand...

A former Goldman Sachs Group Inc. employee "hired to help it monitor computer systems for illicit activity" used the company’s own inside information to invest in mergers and acquisitions involving the bank’s clients, the Securities and Exchange Commission said.

• European stocks up, oil slides as concerns ease over Russia-Turkey tension (Reuters)
• ECB discusses two-tiered bank charges, broader bond buys (Reuters)
• New agonies, alliances as Fed debates post-liftoff plan (Reuters)
• A New Military Power Rises in the Mideast, Courtesy of One Man (BBG)
• Russia's Gazprom says halts gas supplies to Ukraine over payment (Reuters)
• Other central banks set to act, but Swiss policy cupboard bare (Reuters)

Any modest reduction in debt, tax revenues, consumption or new borrowing will bring the entire Status Quo crashing down. This is the bitter fruit of rampant financialization and the ascendancy of maximizing private gain by whatever means are available.

Following yesterday's dramatic geopolitical shock, U.S. equity index futures rise as Russia has not escalated the confrontation with Turkey as some had feared, while Asian shares fall, reversing earlier gains. European stocks are rallying and the euro is falling on the back of a Reuters report that the ECB is mulling new measures to prop up lending, although it’s not clear at this point what the real impact from these measures would be.