Archive - May 7, 2015

Having painted themselves into an impossible corner of junk Keynesian economics, they are now clueless about how to get out. So its time to recognize that there has been a monetary regime change. The Fed might well have been your friend since March 2009 or even for the last several decades. But stranded on the zero bound and smothered by a $22 trillion collective balance sheet, the central banks of the world are now fast becoming your fiend.

Since the end of QE3 (and the end of the government's fiscal year), US macroeconomic data has disappointed and weakened on an unprecedented scale. With April data not showing the post-weather bounce that every sell-side economist is hoping for, the absolute level of macro weakness was only marginally weaker in the past in the aftermath of the Lehman crisis.

The oddest couple out there? Probably.

At 38 consecutive days, it is now the longest streak without the Dow hitting either a 1-month high or low in at least 100 years. That milestone alone would justify discussion, but as Dana Lyon notes, the current 1-month range in the Dow is a very tight 1.58% (the 17th narrowest 1-month range since 1990). Simply put, the bar for setting a 1-month high or low has been very low for the Dow, yet it has been unable to achieve one; but given the length and amount of the market compression, one might expect it to explode one way or another once the streak was broken.

In a quarter in which US GDP is set to decline consumer credit, according to the latest update from the Federal Reserve, increased by just over $45 billion. But how is it possible that with such a massive expansion in household credit there was no actual benefit to the underlying economy? Simple: 98% of the credit lent out in the first quarter, or $44.3 billion, went to student and car loans!

Ever since the mysterious, unexpected bursting of ISIS on the global stage one year ago with much fanfare and even more carefully produced with just the right amount of lighting beheading video clip, we said from the very beginning that entire rehashed sequence of events in the middle east is about one thing: removing Syria's Assad from power just so the nat gas infrastructure from Qatar can traverse the territory and enter Europe, eliminating Russia's energy dominance over the continent. Today we got the latest confirmation of this in an AP report according to which "Turkey and Saudi Arabia have converged on an aggressive new strategy to bring down Syrian President Bashar Assad."

"I love how he criticizes hedge funds, yet he had the first hedge fund. He criticizes activists, he was the first activist. He criticizes financial services companies, yet he loves to invest in them. He thinks that we should all pay taxes, yet he avoids them himself.”

The Mother of Hypocrisy...

Since robots entering the workforce is probably one of the most significant economic trends in the decades ahead, we should all start thinking about how to deal with what will be a major adjustment for hundreds of millions, if not billions, of people.

Americans in The South appear to be rushing through the 7 stages of 'low-oil-price-grief' rather rapidly. After a few months of disbelief and denial, it appears, judging by Bloomberg's Consumer Comfort Index, that 'Southerners' have jumped right to anger and depression as sentiment tumbles to its lowest since Dec 2014. Along with a surge in job cuts in the energy sector, it appears "low" oil prices are not unequivocally good after all.

When it comes to Bund sell-offs, be careful what you wish for...

For over 30 years, sovereign nations, particularly in the West have been buying votes by offering social payments in the form of welfare, Medicare, social security, and the like.

The market is currently engaged in the longest bull run in history without a 10% correction. The decline in momentum, the weakness in economic underpinnings and lack of Central Bank interventions (not to mention the threat of an increase in overnight lending rates) certainly provide the necessary ingredients for a sharper than expected correction this summer.