Archive - Mar 30, 2015

Regarding the major problem of the more domestic issue of economic recovery, unless we would agree, which we really shouldn’t, that making a small group of the population richer while the much larger rest is made poorer, is how we define ‘recovery’, we have no recovery. But it is still accepted and proclaimed like a gospel: our economies are in recovery. If you take a step back and watch things from a distance, it’s truly too silly to be true, but endless repetition of the same lines, be they true or not, has them accepted as being cast in stone. It’s like selling detergent. Of course it doesn’t hurt that people very much want to believe a recovery is here. The stories we are bombarded with 24/7 under the quite hilarious misnomer ‘News’ have been prepared, pre-cooked and pre-chewed for our smooth and painless digestion, and as such they contain only tiny little flakes of reality. They are designed to make us feel good, not understand the world around us. And, as Scott Minerd says, the economic future for your entire families will look utterly bleak. Because that recovery they talk about? It’s not for you.

For the 4th month in a row, personal spending growth missed expectations. With a 0.1% gain in February (against expectations of a 0.2% rise), this growth rate remains below all of 2014's growth. Income rose slightly more than expected at 0.4% (against +0.3% exp) but this is the same growth as January's upwardly reviused +0.4%. That leaves the powers that be very disappointed as the savings rate jumps to the highest since 2012... not exactly the Keynesian pump-primed, low gas prices tax cut spendfest all the smartest people in the room promised...

In addition to Janet Yellen's confused ramblings at 3:45 pm on Friday, which did all they could to push the S&P to close green for the year, the other catalyst that sent stocks higher on Friday afternoon was the unconfirmed rumor reported by the WSJ that Intel would purchase Altera, the news of which briefly sent INTC stock higher than the entire market cap of Altera on what can only be described as the latest short squeeze. Yet one entity that appears unhappy with this news is none other than Goldman Sachs which likely was snubbed as an advisor or an underwriter by Intel in recent months, and which all else equal, once again slaughtered the muppets who listened to its recommendation to Sell Intel stock (just days after another comparable slaughter by Goldman on SanDisk longs this time on the Conviction Buy side).

• Setbacks and progress as Iran, six powers meet to end nuclear impasse (Reuters)
• Russia’s Foreign Minister Sergei Lavrov to Leave Iran Nuclear Talks (WSJ)
• Obama Ramps Up Lobbying on Iran as Deadline Looms (WSJ)
• Greek yields edge up as lenders scrutinise reform pledge (Reuters)
• Oil prices drop on possible Iran deal, dollar (Reuters)
• Yemen’s Houthis Battle for Aden as Saudi Strikes Hit Rebels (BBG)
• Iran nuclear deal to see $20 oil if Tehran floods crude market (Telegraph)
• China’s Zhou Says PBOC Has Room to Act on Growth Slowdown (BBG)

With the rest of the developed world's central banks waiting for the Fed to admit defeat for one more year and delay its proposed rate hike (or launch NIRP/QE4 outright) it was all about China (the same China which a month ago we said would launch QE sooner or later) and hope that its central bank would boost asset prices, when over the weekend the PBoC governor hinted that more easing is imminent to offset the accelerating drag after he admitted that the nation’s growth rate has tumbled "a bit" too much and that policy makers have scope to respond. How much scope it really has now that its bad debt is rising exponentially is a different question. It got so bad, Shanghai Securities News leaked a false rumor earlier forcing many to believe China would announce an unexpected rate cut as soon as today, in the process sending the Shanghai Composite soaring by 2.6%.

What the Heck Is This War About?