Archive - Jun 2015

According to just released final data by the BLS, in Q1 labor productivity barely rose, growing 0.3% in Q1, following a -0.1% drop in the fourth quarter. Worse, on a sequential basis, productivity dipped by a -0.8% in Q1 (a 3.1% SAAR), after a -0.5% drop (-1.9% SAAR) in Q4. This is the first sequential drop in nonfarm productivity in 22 years, or since 1993!
That, in a nutshell, is also the real reason the US economy refuses to grow no matter how many billions in liquidity the Fed stuffs into it.

Why? Just because...and note this plunge began before the data hit this morning on heavy volume.

It’s almost a foregone conclusion that OPEC won’t cut its production levels at its June 5 meeting in Vienna. Anyone needing strong evidence, if not proof, of this need only listen to Ali al-Naimi, the architect of the cartel’s effort to reclaim market share. In fact, some observers say OPEC not only won’t cut overall production levels from 30 million barrels a day to shore up prices, but may even increase them.

After 2 weeks of increassing (though near cycle low) jobless claims, last week saw a modest drop from a revised 284k to 276k. Texas saw initial claims jump to the highest in 5 weeks - stable at new normal higher-than-before the oil price crash. This leaves the smoother average hovering at or near 42 year lows... which leaves everyone in the world asking why ZIRP and why lower for longer and why moar threats of QE at every negative macro print or 2% drop in stocks. It seems pretty clear that companies have cut as far as they can cut... so any downturn in the economy now flows right through to the bottom line. The big question is - does any of this data extrapolate into the noise-prone payrolls number tomorrow.. and thus the future of the western world's wealth-creation bubble machine.

If the central banks' intention was to convert "hedge" funds into what are essentially plain vanilla long-onlies (understandable in a world in which being long the most  shorted names generates outsized returns year after year), they have succeeded.

It's Q and A Time!

"An early election would be possible, but the least likely: the PM will likely be able to pass an agreement through parliament with opposition support, in turn generating strong incentives for a shift to a more moderate coalition within the existing parliament rather than a new electoral campaign following a painful compromise with European creditors," Deutsche Bank says, laying out the likely outcome if and when Greek PM Alexis Tsipras does finally accept an unpopular deal with creditors.

After disappearing from the public scene last November when his term in EC expired, Herman has re-emerged, or rather, reincarnated into his new role. And while it is not hardly as dramatic as the emergence of a Hermina van Rompuy, his new role will surely raise several (knowing) eyebrows. Meet: Japan's new Haiku Ambassador. 

• China stocks fall, led by ChiNext, on margin tightening; Hong Kong down too (Reuters)
• Bond market sell-off rumbles on, stocks feel the pinch (Reuters)
• Bond Rout Wipes Out 2015 Gains as Traders Stay Glued to Screens (BBG)
• Greek Groundhog Day Continues With Talks Failing to Break Impasse (BBG)
• Greece and Its Creditors Agree on Some Measures in Bailout Talks (WSJ)
• 'Bellingcat Report Doesn't Prove Anything': Expert Criticizes Allegations of Russian MH17 Manipulation (Spiegel)
• GE Said to Hire Banks to Start Sale on $20 Billion Assets (BBG)
• Alibaba Pictures plans $1.6bn share sale (FT)
• How Companies Justify Big Pay Raises for CEOs (BBG)

For once Mario Draghi was right. A day after the European central bank head warned of a spike in volatility, volatility did just that, with markets everywhere from China to Europe seeing volatility explode.

Rinse and repeat, rinse and repeat, that’s the story of the ongoing financial crisis that surrounds Greece.

Greece, once again, is staring over the edge into the abyss and is facing imminent financial default, possible collapse and a system breakdown. That is, unless they can once again pull a rabbit out of their hat and stave off disaster for just one more month.

Most commentary still appears predicated on the idea that there will be some last-minute deal - either because the creditors will back down and give Greece some more money without requiring it to be paid back or because the Greek government will back down if it understands that not doing so would ultimately mean leaving the euro. On the other hand, some believe neither side is particularly interested in achieving a deal.

It appears - as opposed to what the world's asset-gathering commission-takers would have one believe - that huge illiquid spikes in bond markets are not good for stocks. As the bond carnage continues to careen throughout Asia, Chinese stock investors appear to have decided enough is enough at doubling their money in a mere few months. After early weakness out of the gate, the ubiquitous dip-buyer-of-last-resort failed to appear as the afternoon session arrived and Chinese stock indices are down between 5% (Shanghai Comp - which never took out its previous highs) and 7% (CHINEXT which was up over 16% in the last 3 days) overnight. Everybody better be hoping for a disastrous jobs number on Friday or this drop may suddenly become the long lost 'healthy' correction in global stocks so many have called for.

“A person under surveillance is no longer free; a society under surveillance is no longer a democracy.”