Archive - Feb 6, 2015

Following a significant downward revision to November's data, December consumer credit growth printed a gain of $14.755 billion, missing expectations of $15 billion (for the 5th month) and hovering near one-year lows. The most notable aspect was the $5.77 billion surge in revolving credit (e.g. credit cards) as Americans extended and pretended into the holidays - the biggest rise since April.

What any student with an eye to getting on in the world should realize is the core truth underpinning right-minded economic analysis: the value of assets in a properly constituted economic system is a direct function of the money created by the central bank. All other knowledge is subsidiary to this key insight. I know this to be true because the great minds of Princeton declare it to be so, and who am I to argue? This insight results in the key truth that money equals value. It therefore follows that the more money that is created, the more value there is in the system. As the discoverer of these great truths, Lord Keynes has clearly shown this to be true... but there is another way.

Mission Accomplished? The "shadow of crisis has passed" but the unemployment rose... but The White House says you can ignore that because wages are growing (but Goldman says ignore that)... President Obama explains.

Presented with no comment...

And just like that, instead of praising the January jobs report, Goldman's Jan Hatzius is far more interested in pounding the table on its one scariest chart...

Following the arrest of 3 Russians on Wall Street for alleged spying, the message from John Carlin, assistant US attorney general for National Security, is clear, "they want what you have." The "they" are multiple foreign nations spying on the US financial markets and the "what you have" is, according to Carlin, financial markets that are "the envy of the world." As we explained recently, it appears the pretext for the scapegoat of the next possible (June rate hike-inspired?) market crash is being prepared, as Carlin confirms, "it's not just the Russians, there are multiple foreign nations that want to gather as much information about" the stock market as possible. When asked why, his response, "they are doing this for a number of reasons."

I looked, and there before me was a pale horse!

Fascinating History

As the jobs' "good news" sinks in and the realization that this is "bad news" for free-money-a-holics hits, US equity markets have stumbled off the exuberant knee-jerk highs and given up the jobs bounce (for now)... as they are reminded that GREXIT is a real risk and oil's price collapse has yet to play out in the real economy...

And the hits keep coming. On the heels of a demand for repayment of ECB's profits from GGB bond gains and to extend the T-Bill limit to give the nation time to negotiate with EU leaders (i.e. a Bridge Loan) which Jeroen Dijsselbloem already dismissed earlier in the day, S&P just piled on...

GREECE RATINGS CUT TO B- FROM B BY S&P; MAY BE CUT FURTHER

This downgrade comes just 5 months after upgrading Greece because "risks to fiscal consolidation in Greece have abated." EURUSD is not moving much (having already cratered after US payrolls) but Greek stock ETFs are sliding once again.

The worldwide rig count ended January at 3,309, down 261 from December but it is the US and Canada that is dominating that collapse. Following last week's all-time record absolute drop of 94 rigs (over 7%, most since APR09), the oil rig count dropped for the 9th week in a row (down another 83 to 1140 rigs - down 27% in last 9 weeks) as it tracks the 4-mo lagged oil price perfectly. The Permian basin saw the biggest cut in rig count. This is the lowest oil rig count since Dec 2011 (down 19.5% YoY) and lowest total rig count in the US since March 2010 - down 25% in the last 9 weeks). Hopes of production cuts are simply wrong as the last 4 times that rig counts have dropped, no production cuts have occurred.

Given the spate of recent poor economic numbers in the U.S. and internationally, analysts are beginning to question the veracity of some of the U.S. government's economic statistics including their jobs numbers today. “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie ...”

There’s a fairly easy way to tell if a firm is a marketing firm or an investment firm. Do you see its advertising on buses, cabs and posters? Do they have a practically limitless range of funds? This is not to denigrate marketing firms entirely. But as the financial markets lurch between unprecedented bouts of bad policy, and achieve valuations that we strongly suspect are unlikely to persist, it may be worthwhile to consider the motives of the people charged with managing your money. Are they asset managers, or asset gatherers?

Almost the entire Treasury complex is now up aropund 30bps on the week. In percentage terms, this is the biggest yield spike for 30Y bonds since January 2009. 30Y is back above 2.50%, 10Y above 1.9%, and 7Y above 1.75% as 2Y yields have exploded 10bps to 62bps (and 39% this week - the most on record).

The difference between America's manufacturing workers and waiters has dropped to a record low of just 1.387 million. The same difference was 11.3 million on January 31, 1990.