Archive - Dec 2014 - Story

Is it any surprise oil prices are cratering? With global GDP expectations plumbing cycle lows, JPMorgan just confirmed the global slowdown is accelerating as their Global Manufacturing PMI printed 51.8 - its slowest level of 'expansion' since September 2013.New Orders fell to the lowest reading since July 2013 and New Export Orders to the lowest since June 2013. But the US is decoupling...

The scripted quality of the Ferguson events seemed as formally predictable as an 1856 minstrel show, and the parallel is worth reflecting on because the nation appears determined to explode again in some kind of a civil war — bearing in mind Karl Marx’s advisory that “history repeats, first as tragedy, then farce.” As is the case with many show-biz extravaganza’s of our time the script had many authors. A week after the grand jury decision and the riot that followed, the Michael Brown incident is already disappearing down the national memory hole. Why? Mainly because anyway you cut it Michael Brown was a poor candidate for martyrdom.

Bottom line: whatever caused the record scramble for rehypothecated gold, it wasn't fears about the outcome of the Swiss referendum. Something else spooked the precious metal a month ago, and as can be seen on the chart, things have only gotten progressively worse since then.

It's doubly different this time...

For the 3rd month in a row, US Manufacturing PMI dropped from 4-year highs to 10-month lows. At 54.8, missing expectations of 55.0 (and down from 55.9) for the 5th month of the last 6 as extrapolated hopes fade into the usual cyclical un-decoupled collapse into year-end (but ignore NRF data). Sadly for the bullish decoupling meme, Markit notes, "the principal cause of the slowdown is a renewed downturn in export orders, which fell for the first time since January." So, amid all of this doom, ISM then beat expectations, printing 58.7 vs 58.0 expectations (down slightly from October's 59.0 print) led by - rather ironically - new export orders surging... US data has gone full China.

Did Icahn just cover? Cramer's view: "that's silly" And no - there's no catalyst - this is your most liquid efficient stock market in the world at work...

After last night's big flush across commodities, they have rallied notably. Gold is now up over $50 from those lows, with Silver, copper, and even crude bouncing hard (after testing below $64 overnight). The USD is notably weaker, stocks lower, and bond yields testing mid-October flash-crash Bullard lows...

The correlation between gold and the national debt was clear for 13 years. It made perfect sense in a free market. You can’t print more gold. It is a relatively scarce metal that has represented wealth for centuries. Fiat currency can be printed at will by corrupt bankers and politicians. Every paper currency ever created eventually reached its intrinsic value of ZERO, as human beings always take the easy way in attempting to create wealth. So what happened in 2013?

With the apparent goal of 'protecting civilians' from ISIS and Syria's al-Assad, the US and Turkey appear to be close to agreeing on the creation of a no-fly-zone along a portion of the Syrian border. As WSJ reports, U.S. and Turkish officials have narrowed their differences over a joint military mission in Syria that would give the U.S. and its coalition partners permission to use Turkish air bases to launch strike operations against Islamic State targets across northern Syria. The no-fly-zone would provide sanctuary to Western-backed opposition forces and refugees. As Bloomberg notes, this is a significant reversal of Obama's earlier policy (fearing it would be a significant strain on the U.S. Air Force and put fliers in mortal danger) pushing US closer to outright proxy war with Russia via direct confrontation with al-Assad's airforce.

Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.

The Nigerian Naira and Russian Ruble have been the hardest hit in the last few days as oil-producing nations across the world see their currencies come under increasing pressure. With both hitting new record lows against the USDollar (with the Naira at 184.5,  already exceeding the recently devalued currencies upper peg band at around 176 per USD), chatter this morning is that the Russian central bank is actively intervening in the Ruble market after it hit 53.9 in early US trading.

• Moody’s Downgrades Japan’s Credit Rating (WSJ)
• China Factory Gauge Drops as Shutdowns Add to Slowdown (BBG)
• Euro zone factory growth stalls in November as new orders sink (Reuters)
• Espírito Santo Faces Money-Laundering Investigations (WSJ)
• Oil at $40 Possible as Market Transforms Caracas to Iran (BBG)
• Hong Kong warns protesters not to return after clashes close government HQ (Reuters)
• Bond Secrets Decoded 9,539 Miles From Wall Street in Lot (BBG)
• Ruble Rally Turns to Rout as Fortunes Tied to Sinking Oil (BBG)
• Loans Made in Blink as Banks, Funds Vie for LendingClub Clients (BBG)

1. Heightened uncertainty over the achievability of fiscal deficit reduction goals and containing debt
2. Economic growth policy uncertainties and challenges in ending deflation
3. Erosion of policy effectiveness and credibility could undermine debt affordability

Another day full of global macroeconomic disappointments is certain to send the S&P500 to all time-higherest records as 100,000 or so E-mini contracts exchange hands between central banks and Citadel's algos.