Archive - Dec 2015

With the dismal 10% drop in China Zhongdi Dairy's IPO as it started trading, it appears Chinese investors are losing faith in the highest-flying stocks. Following Monday's miracle afternoon rescue, ChiNext (tech-heavy) and Shenzhen (tech and growth-heavy) indices are plunging. Shanghai, which initially rose thanks to strength in housing stocks, has given up all its gains as last night's Schrodinger PMIs were neither good nor bad enough to prompt immediate massive monetary liquidity tsunami.

The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money... The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.

It appears that the "Robin Hood" CEO who famously raised the minimum wage of his employees to $70,000 while cutting his own $1.1 salary, lauded by progressives, praised by the media, and adored by "wealth egalitarians" everywhere, may have been nothing but a con man.

"The exception to this global picture is in the US, where sector performance was a Pavlovian response to the much expected upcoming US rate rises (Utilities down and Basic Materials up). Global investors may be cyclically bearish, but US investors appear distracted by the historically cyclically positive message US rate rises might imply. We think this may prove a mistake."

So what do you do when you’re a barbaric monarchy with a justice system remarkably similar to ISIS, but at the same time want to remain very close ally of the U.S. government? You create a sophisticated propaganda network, naturally.

Here's a little ditty on signs of the looming cashless society that the banks are foisting upon the boiling frogs of America.

Don't look now, but it's right in front of your face...

"We will chase and fight any American force deployed in Iraq. Any such American force will become a primary target for our group. We fought them before and we are ready to resume fighting."

It is vital to give proper consideration to the improper liberties that are being taken by those with “unwarranted influence” and “misplaced power”.   Value extraction has replaced value creation in pursuit of short?term, self?serving benefits at the expense of long?term stability and durability of corporate America and therefore the country as a whole.  As citizens, our obligation is to be well?informed, cognizant, outspoken and to vote. The words of men may temporarily suspend but they do not alter the laws of financial dynamics. The fundamentals always take precedence eventually.

While we can account for the jump of $339 billion in November total debt, which is the result of the "debt ceiling" accrued debt recognition, what is unclear is how in the remaining 4 weeks of November, the US managed to add another $335 billion in total debt, bringing the total increase for the month of November to a whopping $674 billion, and total US debt to a record $18.827 trillion.

Well this is a little awkward. After a day of exuberant unsubstantiated auto sales proclamations that a) it's not all subprime, b) 8-year credit terms do not pull forward demand, and c) it's totally sustainable; anyone could have been forgiven for being excited about the total vehicle sales of 18.12mm (according to Wards' data), just above expectations of 18.10mm and flat from October. However, Wards reported just 14.03mm domestic vehicles sold (missing expectations by the most since June) and dropping for the 2nd month in a row. Those darned facts do get in the way eh?

"In the three decades between the surveys, pollsters found the share of young Americans overall who said the American Dream 'is not really alive' grew sharply from 12 to 29 percent. Among white people, it nearly tripled from 10 percent to 29 percent."

"At first read, the report recalls an obituary. There is no room for any growth in the coming quarters. The situation is really, really bad."

After nine weeks of inventory builds in a row, expectations were for a modest 900k barrel draw in total inventory this week. Expectations were crushed as API reported a much-larger 1.6 million barrel build - the 10th week in a row. After three weeks of very significant builds, Cushing - having seen its storage capacity increased to 73mm (from 71.4mm) barrels - saw a smaller-than-expectd 433k build (+1mm build exp.). WTI prices had drifted higher into the API report (after an extremely volatile day) but slipped lower after the print, as anxiety builds ahead of OPEC.

The problem of suggesting that we have once again evolved into a "Goldilocks economy" is that such an environment of slower growth is not conducive to supporting corporate profit growth at a level to justify high valuations. Such a backdrop becomes particularly problematic when the Federal Reserve begins to raise interest rates which removes one of the fundamental underpinnings of an overvalued market which was low interest rates. Ultimately, higher interest rates, particulalry in an economy with a deteriorating economic backdrop, becomes the pin that "pops the bubble."  It is true that the bears didn't eat Goldilocks at the end of the story...but then again, there never was a sequel either.