Archive - Dec 23, 2015

Now what?

Good things are coming for beaten-down commodity investors in 2016...

Maybe it's the "Ex-FX" lack of transparency? Maybe it's the 'taking profits' on the year's biggest winners? Or maybe it's the 32x P/E multiple.. But Nike has gone from hero to zero overnight...

We need a new system. A new system is self-organizing before our eyes. We just have to stop obstructing its rise and start facilitating its expansion in self-evident ways. The model of expecting global corporations and Big Government to solve the scarcity of paid work is broken.

According to the just revealed latest forecast by the most accurate forecaster of GDP, the Atlanta Fed, with all the latest data in hand, the US economy is now estimated to have grown just 1.3% in the fourth quarter, down from 1.9%, and the lowest print it has had throughout the forecast period which started in late October.

An analysis of terror attacks since 2002 suggests U.S. efforts to combat terrorism - i.e., the "War on Terror" - have led to a dramatic increase in death and suffering from terrorism.

Not only were there downward revisions between the November and October "government data", but as the chart below shows, over the past 5 months the data has been consistently "revised lower" with every incremental release.

API's reported huge 3.6mm drawdown in total crude inventories (against expectations of a 2.33mm build) was just the catalyst to send crude prices soaring overnight and DOE just confirmed it with a massive 5.88mm draw - the largest in over 6 months. However, initial exuberance was tempered as Cushing saw a 2.045mm build - its 7th week in a row. And finally, crude production rose for the second week in a row.

Following Existing Home Sales sudden collapse catch down to reality (blamed on new paperwork timing), New Home Sales in November printed 490k SAAR (missing expectations of 505k). Historical revisions enabled a 'rise' MoM but we note that new home sales in The Northeast crashed 28.6% (after a huge spike in October) while The West saw sales rise 20.5% MoM (seriously!!??).

Having seen long-bond yields collapse on heavy volume immediately after The Fed's decision last week to hike rates, it appears the "policy error" message was just too much to bear for an un-manipulated market. The last 2 days have seen a very light volume 13bps surge in 30Y yields, now back above the Maginot Line of 3.00% - erasing any "policy error" questions post-Fed... for now.

From $35.35 lows (in Feb contract) on Monday, WTI crude has extended its overnight post-API inventory gains, pressing up to $37, running the stops to last week's FOMC meeting moves. Let's just hope DOE does not disappoint (and don't forget to look at Cuhsing storage getting full).

The silver market has experienced serious changes which precious metal investors need to be aware.

"To make a total payment will be almost impossible. If a partial payment is made: what bonds should we pay? It is an assessment that is being done. It is highly unlikely that there will not be default, in whole or partially."

If it wasn't for America's war machine, the economy would be deep in recession. Defense spending (aircraft and parts) soared 148% in the last 3 months - biggest such rise since 2007 managing to squeeze Durable Goods Orders overall to unchanged in Nov (vs -0.6% exp). That's the good news. Everywhere else you look bad. Core Capex fell 1.93% YoY - the 10th consecutive YoY drop - something not seen before outside of recession.

The end result was that in November personal savings was $748 billion, a $9.4 billion decline from the $757 billion a month ago, which translates into a 5.5% savings rate, down from last month's 5.6%, however well above the average rate seen over the past 12 months as consumers continue to be unwilling to dip into their savings despite the so-called "gas" tax cut.