Archive - Aug 11, 2015

From $79.94 exuberant bubble highs overnight to $67.50 lows now, SHAK has collapsed over 15% from its post-earnings highs as the reality of a burger chain selling for 100s of multiple of excited future earnings sets in...

Almost 50% more Americans believe the US economy is getting worse than are optimistic about the future. Gallup's latest economic survey shows the economic outlook among Americans at its weakest since September 2014.

For financial asset investors in the U.S. and around the world, the immediate question becomes whether the Fed will now relax its guidance and seeming intention to raise its Fed Funds target. We think the Fed will still raise rates.

Remember yesterday? Yeah, that's over...

Although the headline number suggests that credit demand in China was robust in July, the "expansion" was entirely attributable to Beijing's mammoth equity plunge protection effort. As for the real economy, well, the picture isn't pretty.

That hasn’t stopped many gold bears from using this as an opportunity to disparage gold. A recent article points out that the gold rout has cost China and Russia $5.4 billion. An amount that would sound colossal were it not for the fact that U.S. media companies such as Disney and Viacom collectively lost over $60 billion for shareholders in as little as two days last week ...

It’s very important to call out people like Trump for the man he is, so we don’t simply fawn and fall for a narcissist, strongman-type as a way to deal with our societal pain and frustration... "I was there at the first Tea Party in 2007 and I’ll be damned if I’m going to stand passively by and watch the movement destroyed by a fake conservative."

The Fed has basically borrowed from the future to improve today. The intention of Fed policy over the past 30 years has been to self-correct business cycles into a ‘steadier state’ by easing interest rates into weakness and hiking them into strength. Unfortunately, there is political-asymmetry between easing and hiking which has resulted in the stair-stepping of official interest rates down to the zero lower bound. Monetary policy has reached the practical limits of what it can do.  Thus, the multi-decade credit era is coming to an end... Bad companies should be allowed to fail.  Creative destruction is beneficial in the long run.

Both the 10Y (2.13%) and 30Y (2.80%) yields broke below crucial technical support levels this morning (2.14% and 2.81% 200-day moving averages) - both nearing 3-month lows (in the biggest yield drop in 2 months).

Well that escalated quickly...

As China takes the currency wars to the next level, so OPEC, not to be outdone, rotates the oil war volume to 11. As Bloomberg reports, OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The response - as one would expect - is a plunge in crude prices, erasing all the ridiculous algo-driven gains of yesterday, pushing WTI back on the verge of a $42 handle.

To help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.

How much more devaluation is in store for the CNY? Well, if one believes the PBOC, today's intervention was a "one off." The problem is that just like every central bank in modern history, the Chinese central bank is lying. Here is the truth.

Just as we warned yesterday, unless the Dow can miraculously rally over 17,850, The Dow will close in a Death Cross pattern. This is the first time that the 50-day moving average crosses below the 200-day moving average since August 2011 (which was followed by a 1300 point swing from high to low in The Dow)...