Archive - May 15, 2015

... we have just one question.

The signal hasn’t been unanimous in foretelling weak performance, but it has certainly been the norm over the past 65 years, and to a statistically significant degree. Thus, we would consider this another negative facing the stock market at the present time.

"Banks want assurances from U.S. regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multibillion-dollar settlements," Reuters reports, reinforcing the idea that 'guilty' pleas from Wall Street on FX rigging will ultimately mean absolutely nothing because once the fine print is inserted into the settlements and once the SEC grants every bank's request for a waiver, it will back to business as usual.

We have rich people, poor people, right-wing economists, left-wing economists and even revolutionaries, all contesting Piketty’s argument. It seems we the People do have a point against him. But will it prevail? We’re not optimistic on this one. It is far more likely that Piketty's ideas will gain traction rather than fade away. Why? Because it gives politicians and their Keynesian consorts yet another framework and justification as to why the state should be the key allocator of resources in society.

UPDATE: *BOSTON MARATHON BOMBER TSARNAEV SENTENCED TO DEATH

Just over 2 years after the devastating explosions that killed and maimed many during The Boston Marathon, Dzhokhar Tsarnaev is about to face his penalty. The jury of seven women and five men convicted Mr. Tsarnaev, 21, last month of all 30 charges against him, including 17 counts that carry the death penalty. After 14.5 hours of deliberation, the jury will announce at 3pmET whether he will face death or life in prison.

Despite the government's 'advice' to young debt-laden students, the tragedy of the American farmer continues with worryingly pessimistic views on the future of the industry. With farmland prices falling for the first time in almost 30 years, credit conditions are weakening dramatically and the Kansas City Fed warns that persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity, and JPMorgan concludes, the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016.

Not a day passes without one clueless pundit after another appearing on TV and reading from the teleprompter like a stoned zombie that one must not fight the Fed (and central banks) and buy stocks while shorting bonds. And yet what are central banks buying? Not stocks (at least not officially in the case of the Fed; only the BOJ and the SNB admit to openly monetizing equities).

The answer: bonds.

A day after Kiev chose hawkish US Senator John McCain to serve on President Poroshenko's advisory committee (spoiler alert: he had to decline), the US military rolls through Romania with a "simple message" for Vladimir Putin and Russia. Meanwhile, European officials hold hands and sing Michael Jackson and Lionel Richie's "We Are The World" at a NATO dinner. And yes, we have the video clips. 

Over the last 5 years, over 20% of the initial gains in Retail Sales have been 'removed' by serial downward revisions in later months.

Following the last 5 weeks slowing pace of decline of rig counts (with Wyoming and Pennsylvania regions actually adding marginal rigs), and the rise in crude prices, Baker Hughes reports the slowing pace of decline continues. Total rig count dropped 6 to 888 - the smallest decline since Decmber 5th. Texas' Eagle Ford region added 1 rig. Crude's initial reaction (after its v-shaped dump-and-pump this morning off $59.50 support again) was higher margionally but that quickly faded.

Whether this week’s disaster was human error or not, the larger certainty is that the system has been chronically starved of capital. But the solution is not for a bankrupt government in Washington to pour more money down the Amtrak rat hole in the name of “infrastructure investment”, as the big spenders are now braying in the wake of this week’s disaster in Philadelphia. Instead, Amtrak should be put out of its misery once and for all. Otherwise its longstanding hazard to the taxpayers is likely to be compounded by even more public safety disasters like this week’s tragic event.

Since yesterday's fake AVP tender offer was nothing but a targeted attempt to force a short squeeze in one of the market's most shorted stocks, the best way to be positioned for future such criminal activity is to go long precisely the most shorted stocks, the names which in any other universe would be the first to crash, burn and file bankruptcy, but in this parallel centrally-planned universe may just be the biggest winners.

Reports of the death of the global bond bull market have been greatly exaggerated. Much to the chagrin of all the "told-you-so" tale-tellers on business-media this week, US Treasuries have been in great demand the last 2 days and all bonds 10Y maturity and below are now lower in yield on the week (with 30Y up a mere 4bps). Treasuries are now notably outperforming Bunds on the week.

The costs and consequences of Greece exiting the Eurozone may well dwarf the financial losses triggered by Greece's default.