Archive - Nov 13, 2014 - Story

Russell 2000 rolls over red...

A year ago, in the latest attempt to distract from his company's inability to generate profit, Amazon's Jeff Bezos revealed his latest breathless vision for the latest marketing gimmick future in the form of Amazon Prime Air: a fleet of unmanned delivery drones bringing customers the goods they ordered or, as the case may be, didn't order. Immediately in the aftermath of this announcement, a just as breathless ad hoc group of drone hunters was conceived, and patiently waited for the announcement from Bezos where said Prime Air Drones would be tested so they too could test their sharpshooting skills. As of today they are in luck, because as the FT reports, Amazon has picked one of the intellectual capitals of the Old World, UK's university town Cambridge, as the place where it will test its fleet of unmanned delivery drones.

WTI Crude oil prices tumbled to a $75 handle this morning as Saudi oil minister al-Naimi dismissed claims of a price-war as having "no basis in reality" noting that "Saudi oil policy has remained constant for the past few decades and it has not change today," suggesting expectations of a supply cut at the looming OPEC meetings are overdone. This comment comes after Qatar said it "may" cut output by 500k barrels/day.

While talking heads proclaim - incorrectly - that low oil prices are unequivocally good for the US economy, it is very much not the case for oil producers around the world. Most notably, Venezuela - which 'needs' oil prices above $100 to maintain its socialist utopia - and currently ranks at a lowly 100th on the world's prosperity index, is in grave trouble if this trend continues. Venezuelan bonds plunged to new record lows today as oil prices hit fresh cycle lows, strongly suggesting default or currency devaluation is imminent. However, as is usual (think Mexico) Finance Minister Rodolfo Marco Torres ruled out devaluation even as oil price drop exacerbates country’s finances. As one analyst noted, "there's broad understanding that in the absence of any corrective policy measures that these guys are going to be in serious trouble." It appears they already are. The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is still an eternity for a country that is beginning to unravel.

While the west is seemingly eager to once again restart the military escalation, if only in rhetoric for now, surrounding the east-Ukraine conflict, leading to a report that the "European Union and the U.S. will weigh further sanctions against Russia’s economy and Ukrainian separatists, after the reported movement of tanks, artillery and combat troops into eastern Ukraine", Russia has chosen to change track completely and give the US a dose of its own cooking, by bringing the military threat next to the borders of the US itself.  "In this situation, we have to maintain a military presence in the western part of the Atlantic and the eastern part of the Arctic Ocean, in the Caribbean and in the Gulf of Mexico"  Russian Defense Minister Shoigu said.

What happens next? Here, straight from the horse's mouth that got the first part of the rapid Yen devaluation so right, is the answer. As Edwards updates with a note from this morning, "the yen is set to follow the US dollar DXY trade-weighted index by crashing through multi-decade resistance - around ¥120. It seems entirely plausible to me that once we break ¥120, we could see a very quick ¥25 move to ¥145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards."

It appears the concept of no consequences is now deeply embedded in the American society. As Student loan debtloads surge ever higher - and opportunities grow ever lower - NBC News reports a rather stunning 24% of Millennials said they expect their loans will ultimately be forgiven, according to study released Wednesday by Junior Achievement and PwC US. That helps to explain why delinquency rates are at record highs - aside from the massive debtloads and no high-paying jobs - as students see bankers rigging every market in the world with little to no consequence, one can only imagine the lessons being learned.

Naturally, a man that uttered such powerful words and who also has a considerable following would not appeal to the thug in charge of the FBI at the time, J. Edgar Hoover. So what did Mr. Hoover do? He sent a letter to Dr. King, pretending to be a black person and implied that he should kill himself. None of this is news, but until the New York Times released it yesterday, copies of this letter had always been partly redacted. We now have the uncensored version. Now ask yourself a question. Is the FBI any more ethical today than it was back then?

A 12k rise in initial jobless claims (on a seasonally-adjusted basis) missed expectations by the most in 8 weeks and rose to its highest in 7 weeks at 290k. Non-Seasonally-adjusted, claims rose a more interesting 43k but bigger picture shows the average of this noisy time series hovers near 40 year lows as low-paying jobs replace high-paying jobs... but remember a jobs a job in the eyes of the government propagandists.

• Moar central banks! Asian Stocks Rise Amid Stimulus Speculation; Topix Jumps (BBG)
• Syria rebels in south emerge as West's last hope as moderates crushed elsewhere (Reuters)
• Bufett's Berkshire to Buy Duracell Business From Procter & Gamble in $3B Deal (AP)
• Weak Demand, Real-Estate Slump Signal Headwinds for China (WSJ)
• China Slowdown Deepens as Leaders Said to Mull Cutting Target (BBG)
• Saudis Reject Talk of OPEC Market Share War as Oil Slides (BBG)
• Oil Tankers Stream Toward China as Price Drop Sparks Boom (BBG)

Wal-Mart's Q3 earnings, reported minutes ago, were a masterclass in bottom-line fudgery.

The relentless regurgitation of the only two rumors that have moved markets this week, namely the Japanese sales tax delay and the "surprise" cabinet snap elections, was once again all over the newswires last night in yet another iteration, and as a result the headline scanning algos took the Nikkei another 1.1% higher to nearly 17,400 which means at this rate the Nikkei will surpass the Dow Jones by the end of the week helped by further reports that Japan will reveal more stimulus measures on November 19, although with US equity futures rising another 7 points overnight and now just shy of 2050 which happens to be Goldman's revised year-end target, the US will hardly complain. And speaking of stimulus, the reason European equities are drifting higher following the latest ECB professional forecast release which saw the panel slash their GDP and inflation forecasts for the entire period from 2014 to 2016. In other words bad news most certainly continues to be good news for stocks, which in the US are about to hit another record high (with the bulk of the upside action once again concentrated between 11:00 and 11:30am).