Archive - Feb 2015

With a mere 0.2% rise in manufacturing production (missing expectations of a 0.4% rise), and capacity utilization printing 79.4%, missing expectations of a rise to 79.9%, it is no surprise that overall industrial production missed expectations for the second month in a row. Motor vehicle production fell 0.6% in January and construction supply fell 0.3% - the most in 10 months.

• Be prepared!

While the PPI report is full of useful, seasonally-adjusted data points, the two items the vast majority of American consumers should be most interested in are the prices of beef and veal, and the prices of alcoholic beverages. Here we have some good and bad news: the good news, is that while the beef/veal price index has risen to a new all time high of 255.2, the pace of annual increase is now slowing down, and is is now "only" up 24% from a year earlier. The bad news, is that the price of alcoholic beverages, after posting two straight months of annual price declines, has once again started rising.

Earlier today, we got a hint that hopes that the 5th dead cat "housing rebound" bounce have been indefinitely delayed after Mortgage Applications cratered by over 13% after tumbling 9% in the week before on even the most fractional of 10 Year yield increases. That hope suffered another embarrassing defeat moments ago when the Census Bureau reported that in January both housing starts and permits missed expectations, rising at 1070K and 1053K, respectively, once again missing Wall Street consensus of 1089K and 1067K. The reason: yet another drop in single-family housing. Because while multi-family, i.e., rental units, remained brisk and rose from 340K to 381K for the starts and from 360K to 372K for the permits...

Happy Chinese New Year!

The drop in the price of energy will be initially blamed for the 0.8% MoM drop in Producer Prices Final Demand (far more than 0.4% drop expected) and the most on record. However, ex-food-and-energy, PPI also fell 0.1% (missing expectations of a 0.1% rise) and ex-food-and-energy-and-trade-services, PPI fell 0.3% - so it's not just the energy price drop (even though fuels and lubricants dropped 9.3% MoM). In fact the biggest MoM drop was in furnishings, computer hardware, and TV, video, and photo equipment.

Last week, German equities soared to record highs with the Dax surpassing 11K, not only on the imminent arrival of the ECB's Q€ which provides a risk-less bid to all asset classes, but on news that a second Ukraine ceasefire had been achieved in Minsk. Well, just like the first Minsk "ceasefire", one can promptly forget the just as "successful" second one, because overnight, after a several week siege, the Ukraine town of Debaltseve finally fell to rebel forces with "troops of Ukraine’s Armed Forces laying down arms en masse,” according to Donetsk rebel official Maxim Leschenko says, cited by Tass news service.

• Greece to submit loan request to euro zone, Germany resists (Reuters)
• Ukrainian forces start to quit besieged town (Reuters)
• Bank of Japan maintains policy, no surprises (FT)
• China Considering Mergers Among Its Big State Oil Companies (WSJ)
• Soros Shifts to Europe, Asia as Investors Cut U.S. Equities (BBG)
• Putin tells Kiev to let troops surrender as Ukraine ceasefire unravels (Reuters)
• Venezuela Squanders Its Oil Wealth (BBG)
• Swiss prosecutor raids HSBC office, opens criminal inquiry (Reuters)

There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that "Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout." But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.

America appears to have found something else to blame the Russians (or North Koreans) for... The Weather. As The Daily Mail reports, CIA chiefs fear hostile nations are trying to manipulate the world’s climate... seriously.

None of us are perfect. All of us bend the rules occasionally. Indeed, there was a time when most Americans thought nothing of driving a few miles over the speed limit, pausing (rather than coming to a full stop) at a red light when making a right-hand turn if no one was around, or jaywalking across the street. My, how times have changed. Today, there’s little room for indiscretions, imperfections, or acts of independence. In such an environment, you’re either a paragon of virtue, or you’re a criminal. If you haven’t figured it out yet, we’re all criminals. This is the creepy, calculating yet diabolical genius of the American police state: the very technology we hailed as revolutionary and liberating has become our prison, jailer, probation officer, Big Brother and Father Knows Best all rolled into one.

"There is a great game of poker taking place for the future of this currency," Nigel Farage exclaims as he  deservedly takes a small victory lap over his warnings of the anti-democratic nature of the dis-union that has been created. As his warnings that "the EU will crush, and kill, and destroy nation state democracy," have gone unheeded, this last week has seen The Eurogroup's behavior justify everything Farage has feared... Juncker: "there can be no democratic choice against the Euro."

Like spirits, debt and risk make for a great party but a terrible hangover...

From 'Armageddon' to 'Day After Tomorrow' to 'Independence Day', many have speculated as to the eventual demise of human life on the planet but - according to Dennis Pamlin of the Global Challenges Foundation, no scientists had "compiled a list of global risks with impacts that, for all practical purposes, can be called infinite,” until now. The following list of 12 possible ways that human civilization might end - ranked from least to most likely, come with a warning, "we don’t want to be accused of scaremongering but we want to get policy makers talking." We suspect Paul Krugman will be happy at the economic growth potential...