Archive - Nov 2014 - Story

Because nothing says global demand is picking up like the biggest collapse in crude oil prices since April 2009...

Explain...

All consumption... no production...

It is no secret that one of the primary drivers of relentless S&P 500 levitation over the past two years, ever since the start of Japan's mammoth QE, has been the use of the Yen as the carry currency of choice (once again as during the credit bubble of the early-2000s), whose shorting has directly resulted in E-mini levitation. One look at the intraday chart of any JPY pair and the S&P500 is largely sufficient to confirm this. Those days, however, may be coming to an end, at least according to Goldman which overnight released a note saying that the Yen is "Almost at breakeven: Further yen depreciation could be a net burden."

We should be glad the price of oil has fallen the way it has (losing another 6% today as we write this). Not because it makes the gas in our cars a bit cheaper, that’s nothing compared to the other service the price slump provides. That is, it allows us to see how the economy is really doing, without the multilayered veil of propaganda, spin, fixed data and bailouts and handouts for the banking system.

Still paying a #Div/0 valuation for Facebook or Twitter based on expectations of exponential growth in eyeballs, or rather "eyeballs"? Then perhaps read this first. ".. many of the “users” on social media sites aren’t real people at all – they’re celebrity staff tweeting on behalf of their employer, or PRs promoting a company, or even fake accounts for people that don’t exist at all. In fact, half of all Twitter accounts created in 2013 have already been deleted."

It’s not just voters who buy into popular myths. Many investors do too. Few have wider appeal than the myth that central banks can create economic growth via the printing press.

With all eyes focused on the malls around America, we thought a glimpse at two of the most important commodities to the world economy would provide food for thought...

What was truly notable in Weidmann's statement is his open jab at the stupidity of Keynesian economics itself. To wit from Bloomberg: ECB Governing Council member Jens Weidmann says at event in Berlin that consumer prices in euro area “are strongly influenced by the energy prices, which are at the moment experiencing a positive supply shock.” The punchline:  "There’s a stimulant effect coming from the energy prices - it’s like a mini stimulus package." But wait a minute, isn't deflation under Keynesian voodoonomics, the biggest bogeyman imaginable? It turns out deflation is only bad when it impacts... the S&P 500.

Black Friday is the day when the trademark US consumerism takes center stage for its annual manic, full-frontal exposure around the globe. Here is what it looked like around the US...

The French delivery of two Mistral ships to Russia may be postponed indefinitely (a move which ultimately would cost Hollande over $4 billion in contract breach penalty fees he simply can't afford to pay), but that doesn't mean the Russian navy has been hobbled or is hiding in the corner. To the contrary: according to the following tweet from the UK Ministry of Defense, Russia's navy is getting quite bolder. "Four Russian ships escorted through Dover Strait from North Sea by @RoyalNavy HMS Tyne this morning. Ships have left UK waters."  What happened? As Bloomberg reports, at least 4 vessels which departed the Russian Northern Fleet main base on November 20, led by anti-submarine ship Severomorsk, entered English channel for exercises that include anti-sabotage training, damage control in case of fire and water intake, state-run news service RIA Novosti says, citing statement from Navy.

• Oil Seen in New Era as OPEC Won’t Yield to U.S. Shale (BBG)
• Alberta Producers With World’s Cheapest Oil Face Cascading Woes (BBG)
• Bundesbank’s Weidmann Rejects Calls for German Stimulus Plan (WSJ)
• Google Should Be Broken Up, Say Euro MPs (BBC)
• Calm comes to troubled Ferguson; protests dwindle across U.S. (Reuters)
• Russia’s Banks Feel Capital Squeeze in Grip of Sanctions (BBG)
•  Italian Unemployment Rate Rises to Record, Above Forecasts (BBG)

The biggest, and most market-moving, event overnight continues to be yesterday's shocking OPEC announcement, which is still reverberating across the energy space as markets largely ignore European and Japanese inflation data which is once again sliding back dangerously fast, or Italian unemployment which rose more than expected, and joined France in hitting a new record high. As a result European shares remain lower, close to intraday lows, with the oil & gas and industrials sectors underperforming and telco and travel outperforming as oil continues its decline. EU inflation slowed in Nov. to 0.3%. Italian and Swedish markets are the worst-performing larger bourses, Spanish the best. The euro is weaker against the dollar. And while US equity futures are largely unchanged even as, or perhaps because, the world is screaming economic slowdown, bonds are finally getting the message with U.S. 10yr bond yields falling to only 2.20% as Japanese yields also decline.