Archive - Dec 2015

The third stock market collapse of this century is near at hand. The global economy is in the midst of an unprecedented commodity deflation and CapEx depression - the payback for 20 years of lunatic monetary stimulus and credit expansion. Yet the central banks are powerless to stop the payback. When the Fed announces a rate increase after 84 months of dithering next week in the face of GDP growth that has already decelerated to barely 1% this quarter the jig will be up. Monumental money printing has failed. Soon there will be no place to hide - not even in the Tremendous Ten.

From "pumping out lots of jobs" in September to "not slowing meaningfully" in October, and despite consistent job losses in manufacturing (which is odd because auto sales are so awesome, right?), ADP reports November a jump to 217k (against expectations of 190k and October's 182k). ADP has missed expectations 8 months so far in 2015, but November's beat is the biggest since 2014 which one could argue was just catch up from ADP's big miss relative to BLS data (182 ADP with an upward revision to 196K now, vs 271k BLS). Of course, none of this "data" matters apparently as Fed's Lockhart said just this morning that the Fed's "criterion of job market improvement has been met."

“It is not in doubt. ISIS is almost finished. They are weak. If only America would stop supporting them, we could defeat them in days.”

The EU is warning Greece it faces suspension from the Schengen passport-free travel zone unless it overhauls its response to the migration crisis by mid-December, as frustration mounts over Athens’ reluctance to accept outside support. Meanwhile non-EU member Turkey gloats as it gets a soon to be embezzled wire transfer of €3.0 billion for its "proactive" refugee response.

Prepare for Keynesian Lift Off!

• Yellen, in back-to-back appearances, could close out era of zero rates (Reuters)
• ECB stimulus hopes keep Europe stocks at three-month high (Reuters)
• ECB to Test the Limits of Its Bond-Buying Program (WSJ)
• Watch for U.S. recession, zero interest rates in China next year, Citi says (Reuters)
• Euro’s Loss Being Yen’s Gain May Be Headache for BOJ (BBG)
• Yahoo Board to Weigh Sale of Internet Business (WSJ)
• Islamic State Prevents Civilians From Fleeing Iraqi City of Ramadi (WSJ)

As previously noted, it has been a bad year for some of the marquee hedge fund names, with Einhorn's Greenlight Capital down 21% YTD, and as reported last night, Ackman's Pershing Square is not doing much better and as of November 30, was down 20.8%.  On the weekly table one can clearly see when Pershing's fortunes turned in mid August when the fund dropped from being up 11% for the year to going negative for the year on the heels of the collapse in Valeant shares.

It is only logical that a day after the S&P500 surged, hitting Goldman's 2016 target of 2,100 more than a year early because the US manufacturing sector entered into a recession, that Europe would follow and when Eurostat reported an hour ago that European headline inflation of 0.1% missed expectations of a modest 0.2% increase (core rising 0.9% vs Exp. 1.1%), European stocks predictably surged not on any improvement to fundamentals of course, but simply because the EURUSD stumbled once more, sliding by 40 pips to a session low below the 1.06 level.

When earlier today we read a report in the Greek Enikonomia, according to which Greek taxpayers would be forced to declare all cash "under the mattress" (including inside) or boxes that contain more than 15,000 euros as well as jewelry and precious stones (including gold) worth over 30,000 euros, starting in 2016, we assumed this has to be some early April fools joke or some mistake. However, it was not a joke...

While the lifespan of affluent whites continues to lengthen, the lifespan of poor whites has been shrinking. As a result, in just the last four years, the gap between poor white men and wealthier ones has widened by up to four years. This was not supposed to happen. For almost a century, the comforting American narrative was that better nutrition and medical care would guarantee longer lives for all. So the great blue-collar die-off has come out of the blue and is, as the Wall Street Journal says, “startling.”

“Russia’s installation of their anti-aircraft missile-defense system increases that possibility of — whether it’s intentional or even an accidental event — where one side may shoot down the other side’s plane. And that’s really where the potential is for this devastating nuclear war."

In a perfectly timed update to his infamous April 2009 "worse then The Great Depression" chart, Kevin O'Rourke has unveiled his latest chart-du-poor. With US manufacturing collapsing, bond yields tumbling, and The Fed about to hike rates to prove they can, this so-called 'recovery' has fallen below that following The Great Depression. As O'Rourke sums up, "pretty dismal stuff. Let’s hope that we can at least avoid the famous 1937-38 double dip."

The catch-22 for ownership is once they are in this position is that they cannot fire the players, so the coach must always be the one to get fired.

While the populations of Europe and the US are fed raw propaganda about the regional aims involved, the reality is far different. While we might be tempted to sit in our Western environs, secure in the idea that at least we aren’t ‘over there’ where all the bad things are happening, it would be a mistake to think that this turmoil will not impact you.