Archive - Feb 2015

Overnight we learned from Vice Admiral Joseph Mulloy, deputy chief of naval operations for capabilities and resources, who testified before the House Armed Services Committee's seapower subcommittee that China "is building some fairly amazing submarines and now has more diesel- and nuclear-powered vessels than the United States," “They may not be the same quality, but their submarine forces are growing at a tremendous rate. They now have more diesel and nuclear attack submarines than we have,” the admiral told the lawmakers. “They are producing some fairly amazing submarines and they are actually deploying them.”

Welcome to the second arms race.

And black is white.

While we noted their 'nein'-ness with regard Greece earlier, it appears the Germans have take to satire to make their point... The following brilliant clip begins with a confident man exclaiming "We are Germans... we truly are a fearless bunch of mother-f##kers..." who then quakes in his jackboots  "except for one man... V for Varoufakis."

With Prime Minister Yatsenyuk putting his foot down and squeezing the central bank to lift capital controls, Ukraine's currency is totally collapsing this morning. Up over 5 handles to a fresh record low of 33.75/USD, we suspect currency trading will be halted any minute. While we discussed the endgame for Ukraine last night, on the street, things are dire with ATM lines, shelves emptied, and local currency exchanges marking up levels dramatically more than the 'official' rates...

Moments ago the Bank of Greece presented its latest, January, deposit data. And it's a doozy: following a record €12.2 billion monthly outflow, greater in absolute and relative terms than anything experienced during any of the previous Greek crises and bailouts, the total amount of Greek corporate and household deposits has now tumbled to just €148 billion. This number is in line with some of the more pessimistic expectations, and brings the total cash holdings at Greek banks to the lowest level since August 2005.

As one wit noted, it appears former White House Press Secretary Jay Carney is moving from one non-profit organization to another. As Politico reports, Carney joins Amazon on Monday as senior vice president for Worldwide Corporate Affairs - reporting directly to Jeff Bezos and topping current veteran PR Chief Paul Misener.

What do people have to be 'uncomfortable' about?!! Stock markets around the world are at record highs... real wages just jumped by the most MoM since 2008... So why oh why did Bloomberg's Consumer Comfort Index plunge to its lowest of the year, falling by the most since May 2014? Perhaps, just perhaps, the market is a red herring... distracting the plebeians from the reality of the economy?

Oh well, some are more equal than others. One day after Eurogroup head Dijsselbloem says France won’t get any more lenience... "France must respect EU budge rules," ... the EU over-rules him "France gets more time to meet EU budget rules."

In today's deluge of macro data, one number stood out: the parallel release by the BLS of the real average hourly earnings, which is simply taking the previously reported nominal hourly wage data, and applying whatever deflator gets released in parallel by the BLS. And, not surprisingly, after the nominal jump in January wages, a number which may very well be revised lower as has been the case so often before, courtesy of the headline deflation, the real jump in hourly wages was even higher. In fact, rising to an inflation adjusted $10.55/hour from $10.42 in December, it meant real wages rose by 1.2%, which was the best jump in hourly wages since... the months following the Lehman collapse. Because everyone remembers how the deflationary vortex in the aftermath of the Lehman bankruptcy led to a sense of wealth and eagerness to spend deflation adjusted wages.

Despite proclamations that "the shadow of crisis has passed," November durable goods orders were weak, December durable goods orders were weaker, and while January's noisy headline Durable Goods Orders beat expectations (+2.8% vs +1.6% exp), ex-Transportation it missed  (printing +0.3% vs +0.5% exp.). A quick glance at YoY core capex and it is clear that the crisis has anything but passed. Capital Goods shipments fell a greater than expected 0.3% (against expectations of a 0.2% rise) for the sixth miss in a row and 3rd drop in the last 4 months.

As previewed earlier today, January CPI data was historic in that, 6 years after Lehman, the US just reported its first negative headline CPI print, with overall inflation, or rather deflation, in January coming at -0.1%, in line with expectations, and down from the 0.8% in December. On a monthly basis, CPI tumbled by 0.7% from December, driven almost entirely by collapsing energy prices. Excluding the Great financial crisis, one has to go back a few years to find the last time the US posted annual headline deflation.... all the way back to August 1955, or just about the time Marty McFly was trying not to dance with his mother.

and more news moving the markets

After last week's holiday-shortened exuberance over initial jobless claims, this week's slam back to reality is quite a shock to the "everything is awesome" crowd. Initial jobless claims jumped 31,000 to 313,000 - the biggest percentage rise since December 2013. Continuing claims dropped modestly but remain up around 3.5% over the last quarter - near the worst since 2009.

One day ahead of a key vote in the German Bundestag whether to ratify the 4-month Greek bailout extension, the biggest-selling, mass-market newspaper (or tabloid as some call it) with a circulation of 2.5 million, Bild, has made it very clear just how it feels about the latest Greek can kicking event.

Yesterday we exposed the deja vu-ness of the API vs DOE inventory price moves in WTI. Today we begin to get some confirmation as a growing divergence between excess supply (and weak demand) for WTI and rising demand for Brent push the spread over $11 and the contango above $2...