Archive - Aug 6, 2015

"The question for 2015 is whether Fed actions are going to take away the liquidity punch bowl, and create a problem for the next rally's ability to achieve escape velocity... We saw this principle of diminished liquidity back in 1998-2000, and again in 2007-08..."

What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course. Where have we seen this story before...

The veracity of China's economic data has long been the subject of debate and when FT called out the country’s National Bureau of Statistics for employing what we called "deficient deflator math" the NBS responded, saying the data reflected the "real situation." Now, virtually no one believes Beijing, with some analysts simply dismissing the "official" figures out of hand. 

Aside from the socialist utopias of Greece and Venezuela, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone... it's all gone.

• US Change in Nonfarm Payrolls (Jul) M/M Exp. 225K (Low 140K, High 310K), Prev. 223K, May. 280K
• US Unemployment Rate (Jul) M/M Exp. 5.3% (Low 5.2%, High 5.4%), Prev. 5.3%, Apr. 5.5%
• US Average Hourly Earnings (Jul) M/M Exp. 0.2% (Low 0.1%, High 0.3%), Prev. 0.0%, Apr. 0.3%

We have shown the following chart, showcasing the unprecedented divergence between commodities and stocks countless times: And now the sellside is finally starting to notice, and instead of merely falling back on its traditional "but if you ignore energy..." platitudes aimed squarely at the 5-year-old trader market, is taking it seriously. Here is Credit Agricole's Valentin Marinov with a note released in which he notes simply: "something has to give."

It is unclear what catalyzed today's dump. Futures were briefly green at the open, then as if all hell broke loose and without an explicit  catalyst (although the technical collapse of numerous "story stocks" which had been market leaders for months, both today and in recent weeks has not helped) the E-mini, and individual stocks, just took out level after level of bids and at last check the Dow has dropped to 6 month lows, the S&P is just barely green for the year, while the biggest pain is in the Nasdaq which has dropped as much as 2% intraday. Below we lay out the biggest losers from today's market drop.

In case you’ve been living under a geopolitical rock for the last couple of years, you’d know that despite a brief period of time during which Egypt appeared headed toward a democratic form of government, it went from one brutal dictator to another. As was the case during Hosni Mubarak’s decades of rule, this is precisely how the U.S. government likes it. So much so, that U.S. officials are not only selling arms to the latest despot, General Abdelfattah al-Sisi, but they are actively bragging about it on Twitter.

In early 2007, market internals began to weaken dramatically. Talking heads and asset gatherers said fears were overblown, risk was contained, Fed has it under control, stay the course. Six months later, the equity markets began to collapse and then accelerated lower. Today, in an eery case of deja vu all over again, it has been six months now since US equity market internals began to decouple from the manipulated index levels that manufacture wealth and happiness across America... what would you do?

Bill Ackman had a $1Bn shortfall to cover (allegedly) in his Pershing Square Fund. 

The Atlanta Fed's Q1 and Q2 GDP forecasts were virtually spot on with what the BEA ultimately reported. Which is why if its accuracy persists, not only the Fed, but Wall Street strategists suddenly have a very big headache on their hands. Moments ago, the Atlanta Fed just released its much anticipated first estimate for Q3 GDP. It was a doozy, at just 1.0%, or more than 2% below the consensus sellside estimate.

So where did all this growth of the economy end up? How can the economy grow by roughly one-third in real dollars while real median household income drops like a rock and real wages/salaries are essentially unchanged for 15 years?

With just hours to go until the first GOP Presidential candidate debate circus is unleashed, it appears the GOP is in full panic mode. With 10 hopefuls heading to their lecterns, only one stands out (in polls) and that, as The Hill reports, despite being snubbed by The Koch botthers, has Republican National Committee (RNC) Chairman Reince Priebus saying that Donald Trump is offering his party’s voters a breath of fresh air.