Archive - Sep 2015

While Mr. Dimon's view - "Amerca has the best hand ever dealt right now." is certainly uplifting, it is a bit delusional. But of course, give any person a billion dollars and they will likely become just as detached from economic realities. Does America have "greatest hand ever dealt." The data certainly doesn't suggest such. However, that can change. We just have to stop hoping that we can magically cure a debt problem by adding more debt and then shuffling it between Central Banks.

Because the only people worse at their jobs than weathermen are economists...

The National Highway Traffic Safety Administration (NHTSA) and the Alliance of Automobile Manufacturers is currently working on a plan to put alcohol detection systems in every vehicle. The plan, called Driver Alcohol Detection System for Safety (DADSS), is still in its early stages, and while they are calling this technology “non-invasive” but it tests the content of your blood every time you get into your vehicle, which by its very nature is extremely invasive.

As Benjamin Netanyahu visits Moscow to discuss the possibility that Russian arms delivered to Syria could end up being funneled to Hezbollah, the action on the ground heats up with the Russian embassy in Damscus coming under mortar fire. The Kremlin has condemned the attack as "criminal" and is now calling for "action." 

Two weeks ago, when no one was talking about the possibility of a government shutdown, we warned it was coming. Today, as Politico reports, with very little time left to reach a deal, budget experts project a 75% chance of a shutdown. No matter how immaterial in terms of their economic impacts, government shutdowns create uncertainty and thus influence Fed decisions and as SocGen notes, with the odds of an October liftoff low, a government shutdown could lower them further. Although funding issues should be resolved by the December FOMC meeting, there is a small chance that the fiscal standoff extends into the end of the year (i.e. due to a temporary continuing resolution), creating another deterrent for the Fed.

It's no secret that Brazil was long expected to be the epicenter of any future EM crisis just as it was, in many ways, the picture of EM success during better times. That said, even we’ve been surprised with the pace at which the situation has deteriorated and in the wake of the S&P downgrade the market is now left to ponder just how much worse things can get. According to Goldman the list of obstacles is laughably long.

The Federal Reserve system was created in December 1913 with the stroke of the pen by then President Woodrow Wilson. Since that time, consumer purchasing power has fallen from $1,000 in December 1913 to … $40 today.

The technical pattern for S&P 500 and many other US and global equity market indices is sell rallies, according to BofAML's Stephen Suttmeier, who notes that the market is as overbought now as it was in July. Current price action suggests “dislocation” rather than “capitulation” and we continue to see the risk of retest / undercut of the August 2015/October 2014 lows of 1867-1820.

"When central bankers start talking like FX strategists, it can signal something important"...

So who is the most powerful woman in the world now?

Below we show the latest monthly data from CAT which is once again in negative territory across the board, but more importantly, the global headline retail drop (down another 11% in August) has been contracting for 33 consecutive months! This is not a recession; in fact the nearly 3 year constant contraction - the longest negative stretch in company history - is beyond what most economists would deem a depression.

Last week was the watershed for central banking and for the illusion that the current disposition of things has a future. 

For a brief shining moment this morning, the lack of a total bloodbath in Asia, some desperate spin about how China is not collapsing, and a hawkish Bullard provided just what the market wanted - higher USDJPY and thus soaring stocks. Once Europe closed, the mysterious bid for the dollar (EUR offered) disappeared... and so did Nasdaq gains...