Archive - Feb 2015

With nearly 1400 killed in Iraq in January alone (800 of them civilians), Iraqi Foreign Minister Ibrahim al-Jaafari told his visiting Austrian counterpart today that "the fight against Islamic State is effectively 'World War III' and that all the world's major capitols are under threat."

With just three slides and 5 minutes and 44 seconds, Tim Price breaks down everything that’s wrong with the markets... and with the conventional investing mentality that most investors cling to like a warm blanket...

Because nothing says 'totally normal' markets like day after day of pre-NYMEX close ramping of the world''s biggest commodity's futures prices...  When all that matters is the centrally-planned narrative of money-printed growth, why would it surprise anyone that this would happen?

All day mainstream media has been crowing about Auto sales being mind-blowing... record-breaking... colossal... so we have a simple question... when Ward's released its US Domestic Auto Sales (SAAR) data this afternoon... why did it miss expectations and show a 2nd monthly drop in a row? January printed 13.31 million cars SAAR, missing expectations of 13.5 million and dropping from December's 13.46 million SAAR. Paging Phil LeBeau?

A few days ago we wrote that "Either Oil Soars Back To $88, Or Energy Stocks Have To Tumble By Over 40%." The basis for that analysis was a forward Energy Sector multiple which last week was just shy of 24X. It's time for an update because following today's latest surge in energy stocks, the most recent forward P/E multiple for energy companies is... well, see for yourself.

STFU Troublemaker!

“It would have provoked a crisis without precedents in Argentina," exclaims a political analyst after, as The NYTimes reports, a draft of a warrant for the arrest of President Cristina Fernández de Kirchner - accusing her of trying to shield Iranian officials from responsibility in the 1994 bombing of a Jewish center - was found at dead prosecutor Alberto Nisman's home. The new revelation has further inflamed theories regarding the heightened tensions between him and the government before he was found dead, as "it would have been a scandal on a level previously unseen."

The devil is in the details: The market is likely too excited about falling rig counts. Even after the natural gas experience, the market fails to appreciate that the relationship between rig count and production can be deceptive. Headline rig count declines may look impressive, but as we look at the data, much of the drop in oil rig count has come in low yielding vertical/directional rigs – i.e. the low-hanging fruit. Even within horizontal rigs, much of the decline has come in lower performing plays or lower tier counties within high quality plays. In some cases, we’ve seen a reallocation of rigs between counties within plays. This was particularly prominent in Midland last week. The most productive rigs will likely remain as long as possible, esp where hedges are in place, until redeterminations or cash flow issues force additional cuts.

If the U.S. economy is now dependent on marginal lenders and borrowers, then it is exceedingly fragile. The cure for systemic fragility is not low interest rates forever--it's a market that transparently prices credit and risk for lenders and borrowers, qualified and marginal alike.

So much for the Greek "conciliatory proposal" story, driven by yesterday's FT article, and the catalyst for Monday's late day market surge.

For anyone who has traded RadioShack's bonds or stocks over the last decade or so, the constant threat of an LBO has been the bane of any fundamental analysis as one Credit Suisse memorably described it as "a company in a virtual state of constant collapse." It appears, with multiple default notices this week and the news that NYSE will suspend/delist trading in the ever-on-the-block company, that the 'LBO rumor' threat is over. With several firms (Sprint, Sanpower, and Amazon) mulling post-bankruptcy purchases, the concept of a pre-petition savior appears dead in the water...

As Crude's bounce gathers pace so the world's beaten-down commodity-currencies are exploding higher. Aussie Dollar has given back all its RBA rate curt losses, The Russian Ruble is soaring, and the Canadian Dollar isd back under 1.24 against the USDollar... The USD Index is now down 1.3% since Friday.

The West Goes Crazy On Propaganda

Moments ago ISIS released a video showing a Jordanian pilot captured by the Islamic State extremist group being burned to death.  According to AP, which could not confirm tha authenticity of the video, the clip was released on militant websites and bore the logo of the extremist group's al-Furqan media service. The 20-minute-long video "featured the slick production and graphics used in previous videos released by the group."