Archive - Aug 6, 2015

17 Entered... Despite the onslaught of attacks from the other 16 GOP Presidential nominee candidates, Donald Trump came out the 'winner' in his usual brash manner threatening to run as an independent and able to dominate the conversation, pitbull back at any jibes, and shrug off cozy Clintonite comments. Ted Cruz and Rand Paul appeared to have a strong showing but "had a tough night" in Trump's words. Rick Perry blew up again, calling the former President Ronald 'Raven' - which his team vehemently denied the entire FOX watching audience heard. Carly Fiorina easily won the undercard against a field of has-beens and wannabes and surely deserves some more top-billing in the next Republican death-match. In the immortal words of Kenny Rogers, we hope a few of the 17-strong gaggle now "know when to fold 'em," and can we suggest Rick Perry's corner "throws in the damn towel."

Today’s visualization breaks down $59.7 trillion of world debt by country, as well as highlighting each country’s debt-to-GDP ratio using colour. The data comes from the IMF and only covers external government debt. Combining the debt of the United States, Japan, and Europe together accounts for 75% of total global debt.

The #1 question we get after we review correlations every month is “Why are they so high relative to long term historical norms?” Our answer is that Federal Reserve policy has been an unusually important factor in asset prices since 2009. The unusually easy monetary policy since that time (and its planning, implementation, and effect on the economy) has been a powerful unifying story in capital markets. Now, as the Federal Reserve moves to return the economy to a more “Normal” policy stance, correlations should drop. That they have not yet moved convincingly lower is a sign that equity markets may want to see the Fed actually pull the trigger.

Things are getting downright scary in emerging markets as a "triple unwind" in credit, Chinese leverage, and loose US monetary policy wreaks havoc across the space. Between a prolonged slump in commodity prices and a structural shift towards weaker global trade, the situation could worsen materially going forward.

It turns out making money trading stocks is not "easier than farmwork" and, as China Daily reports, a stunning 24 million Chinese 'investors' have shuttered their trading accounts since the end of June. Unlike in the U.S., where institutions dominate stock trading, retail investors are king in China, owning around 80% of listed stocks’ tradable shares, according to investment bank CICC. With the number of small investors holding stocks in their accounts sliding to 51 million at the end of July from 75 million at the end of June, it appears some grandmas and farmers have learned their lesson (for now).

What a pathetic nation of entitled whiners we’ve become. When did participation in a sport or any competition deserve a trophy? Trophies are for winners. Trophies are for the people who excelled. Trophies are for the people who worked harder than their competitors and won. You get ahead in life by hard work, using your brain, and refining your social skills. The free shit army mentality permeating our culture drives the participation trophy bullshit. Real free market capitalism (not the crony capitalism/socialism) has winners and losers. Losers need to work harder to become winners. Not in America today. The losers have a million excuses and think they deserve exactly what the winners have achieved.

While many labor market indicators were softer in July, some important service sector indicators, such as ISM nonmanufacturing employment, were significantly stronger; and on balance, they expect job growth roughly consistent with the 223k increase in June. The participation rate showed a surprising drop of 0.3pp in June to 62.6% - due in large part from a calendar effect caused by the timing of the reference week relative to the end of the school year - they therefore expect an at least partial rebound in July.

One year ago, as part of its always entertaining long-run forecasting exercise, Bank of America predicted that GDP growth in 2015 and 2016 would be 3.3% and 3.4% respectively. Fast forward one year, when in its updated "long-run" forecast, Bank of America's crack economist Ethan Harris admits he was off by "only" 30% in his prediction of next year's GDP, and instead of 3.3%, he now "forecasts" 2015 GDP to be... 2.3%. But the punchline is this: "if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. We plan to update this table on a regular basis."

Concentrated poverty in the neighborhoods of the nation's largest urban cores has exploded since the 1970s. The number of high poverty neighborhoods has tripled and the number of poor people in those neighborhoods has doubled according to a report released by City Observatory...

Six years ago, hardly anybody outside financial circles had any idea what Quantitative Easing was – hell, many within financial circles had no idea what QE entailed. The success of the narrative created around QE; that it is the mythical ‘free lunch’ that we all intuitively know can’t exist but secretly hope does, has played perfectly to the public and now, having endured for two electoral cycles, the next wave of politicians also believe it will have no consequences and are actually using it when planning the message they feel will endear them to the electorate. What plays better than free money?

It appears that after the great collapse of 2014, oil trading "god" Andy Hall refused to learn from his mistakes, and was convinced that oil would promptly rebound up to its historic levels. He was wrong, and as Reuters reports, after two consecutive months of 3% losses in May and June at which point he was up just 2% for the year, July was by far the cruelest month in history for the oil trader, a month in which he suffered a whopping 17% loss, one which lowered his aum by $500 million to $2.8 billion.

When we earlier noted the change of course for the GOP as RNC Chair Riebus showed Donald Trump much love, we wondered why the sudden shift of attitude and comment on being a Republican nominee? Well, perhaps, just perhaps, there is a reason why Republican leadership is vying for Trump's 'support'... As WaPo reports, former president Bill Clinton had a private telephone conversation in late spring with Donald Trump as he neared a decision to run for the White House, according to associates of both men. While there are no specifics about the call, we are reminded that Trump has also donated to Hillary Clinton’s Senate campaigns and to the Clinton Foundation. With Hillary facing plunging poll numbers and FBI probes, is The Donald the Democratic nominee in waiting?

The "main event" GOP debate isn’t until 9 p.m. ET on Thursday, but for some, the anticipation surrounding Donald Trump’s debate debut will be too much to handle. For those folks, there’s the so-called "undercard", which kicks of four hours earlier and should suffice as an appetizer until the Trump-sized entree is served up piping hot on Fox later this evening. Here is your full undercard preview.