Archive - Aug 2015

Simply put, Gold stymies "welfare statists," but back in 1966 no lesser credit-nation-creator than Alan Greenspan still belived in free markets and sound money. You can obstruct price discovery and you can disguise and distort the real value of things. But Mr. Market will get even someday. He always does.

Boeing, whose Chairman Jim McNerney says the demise of the Export Import bank amounts to "craziness", lost a contract worth several hundred million dollars last month, after the buyer backed out citing credit concers related to the expiration of the Depression-era institution's charter. Now, Boeing and GE alike are threatening to move American jobs overseas if Congress fails to renew the authorization for what some commentators call "a vast, well-funded network of consultants, lobbyists and big-government interest groups."  

Dear Fed: behold another example of why your ludicrous rate hike ideas will crush the economy. Moments ago the BEA reported that the June international trade deficit spiked by 7.1% from $40.9 billion in May (revised) to $43.8 billion in June, as exports decreased and imports increased.  The previously published May deficit was $41.9 billion. The goods deficit increased $2.9 billion from May to $63.5 billion in June. The services surplus decreased less than $0.1 billion from May to $19.7 billion in June.

Disney is down over 8% from post-earnings highs for its biggest drop sicne at least Oct 2014 and back at 2-month lows... The Happiest Place On Earth... isn't...

Jay Powell reminded investors that September is not guaranteed and a dismal ADP print confirmed that there's maybe enough bad news that we get one or two more months of ZIRP... so stocks surge on algo eagerness. Bonds are also rallying and the dollar fading...

Following June's small-business-driven better-than-expected rise in ADP employment, July printed a stunningly weak 185k against expectations of 215k - the biggest miss since March. This is around the lowest level of the year and lowest since Q1 2014. It is also 20% lower than the 232K ADP print a year ago, and the weakest July print since 2013: all signs screaming QE4 a rate hike is imminent.

Standard Chartered’s new CEO Bill Winters thinks the bank is positioned well in "markets which will offer outstanding opportunities for decades to come", and while that may be true, the opportunities in those markets didn’t prove to be all that outstanding in the first half of the year, as the bank’s EM and commodities exposure contributed to a 44% decline in H1 profits and prompted a 50% dividend cut. 

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• Turkey says coalition to launch 'comprehensive battle' against Islamic State (Reuters)
• Buffett’s Celebration Tempered by 50th Anniversary Stock Slump (BBG)
• SEC Set to Approve CEO Pay-Gap Disclosure Rule (WSJ)
• Greece wants full bailout, not bridge loan, ruling party says  (Reuters)
• Stocks Rise Fueled by Strong European Corporate Earnings and Chinese Data (WSJ)
• JPMorgan Reclaims Place Among U.S.'s Top 10 Biggest Stocks (BBG)
• Eurozone retail sales fall sharply in June (MW)

'Death of gold' has been greatly exaggerated. It is important to consider gold in local currency terms. In euro, gold is up 2% in 2015, after 13% gain in 2014.

Curious why after its massive drubbing yesterday, which led to the second highest volume day for AAPL stock in 2015, the phone market is down another 1.3% this morning? The reason: Wall Street's momentum chasing penguins have re-emerged, and moments ago Bank of America, right on time as in just after the stock broke its 200 DMA and entered a correction, decided to downgrade AAPL from Buy to Neutral, lowering its price target from $142 to $130.

• All surveyed analysts expect the Bank of England to keep monetary policy unchanged, with the bank rate at 0.5% and the Asset Purchase Facility at GBP 375bln

• Focus expected to instead by on minutes and Quarterly Inflation Report (QIR) release with minutes expected to show a 7-2 vote split on keeping rates on hold

• QIR will be analysed to see if it compares or contrasts to recent hawkish BoE rhetoric

In many ways the overnight session has been a mirror image of yesterday, with the dollar accelerating its Lockhart-commentary driven rise, which curiously has pushed ES higher perhaps as a result of more USDJPY correlation algos being active and various other FX tracking pairs. Indeed, the weak yen is all that mattered in Japan, where the Nikkei 225 (+0.5%) rose amid JPY weakness, despite opening initially lower as index heavyweight Fast Retailing (-4.5%) reported a 2nd consecutive monthly decline in Uniqlo sales. Elsewhere in mirror images, China slid 1.7%, undoing about half of yesterday's 3.7% jump, and is now down for 4 of the past 5 days.

Things not adding up with the current pricing structure...

It's time to challenge the notion that the decline of a currency can be measured simply by the rate of price increases. This price-centric view misses the ongoing hyperinflation.