Archive - Jan 2014 - Story

Show this article to anyone that believes that the economy has actually improved in the last 5 years.  On Tuesday evening, the President once again attempted to convince all of us that things have gotten better while he has been in the White House.  He quoted a few figures, used some flowery language and made a whole bunch of new promises.  And even though he has failed to follow through on his promises time after time, millions upon millions of Americans continue to believe him.  To say that his credibility is "strained" would be a massive understatement.  No, things have not been getting better in America.  In fact, they continue to get even worse.  The following are 32 statistics that Obama neglected to mention during the State of the Union address...

The following infographic focuses on what is probably the key issue for current state of the physical gold-strapped market: which gold miners hold the most (physical, not paper) supply.

Since his appointment, the balance sheet of Ben Bernanke's Fed has exploded, stock prices have resurged to newerer highs, and home prices are breaking (bad) records once again. However, the following chart of sentiment towards the money-printer-in-chief by income bracket sums it all up... (despite Bernanke's "belief" that "Fed policy is a Main Street policy") Greenspan will be happy though, as Bernanke's disapproval rating is almost double that of his when he left office in 2006 (and approval rating considerably lower).

By now everyone is aware that come February, and those January electricity and heating bills arrive, a substantial portion of any discretionary income the average consumer may have had will go out the window, once again hitting the US economy where it hurts the most: the 70% of it that comprises consumption. And while the cold weather persists, there is little probability of a quick return to normalcy for natgas prices, which is where the CME comes in. Having hiked natgas margins by 20% six days ago - a move which did nothing - moments ago the mercantile exchange resorted to tactics which are all too familiar to gold bulls circa the summer of 2011 when the CME was hiking gold margin not by the day, but sometimes by the hour. Sure enough, here is the second natgas margin hike in one week, this one by 26%. It remains to be seen if this follow up attempt to spook speculators achieved much if anything.

"Just one more roll of the dice...?"

The problem is twofold. First, current accounts are a zero sum game, so future improvements in emerging market trade balances have to come at someone else’s expense. Second, we have had, over the past year, only modest growth in global trade; so if EM balances are to improve markedly, somebody’s will have to deteriorate. When the 1994-95 “tequila crisis” struck, the US current account deficit widened to allow for Mexico to adjust. The same thing happened in 1997 with the Asian crisis, in 2001 when Argentina blew, and in 2003 when SARS crippled Asia. In 1998, oil prices took the brunt of the adjustment as Russia hit the skids. In 2009-10, it was China’s turn to step up to the plate, with a stimulus-spurred import binge that meaningfully reduced its current account surplus. Which brings us to today and the question of who will adjust their growth lower (through a deterioration in their trade balances) to make some room for Argentina, Brazil, Turkey, South Africa, Indonesia...? There are really five candidates...

There is no point in trying to avert or prevent bubbles caused by monetary pumping by regulatory means. If one avenue for bubble formation is cut off, the newly created money will simply flow into another area. In fact, new bubbles almost always become concentrated in new sectors. If there were a genuine desire to keep the formation of bubbles in check, adopting sound money would be a sine qua non precondition. However, no-one who has any say in today's system has a desire to adopt sound money and give up on the failed centrally planned monetary system in favor of a genuine free market system. Our guess is that the booms and busts the current system inevitably produces will simply continue to grow larger and larger until there comes a denouement that can no longer be 'fixed'.

Did the Amazon bubble just pop? Unless Jeff Bezos announces he is working on a space station that just may be the case, because while the company missed both the top and bottom line, and guided lower  - traditionally a perfect trifecta to send the stock soaring afterhours - the stock is plunging some 10% after hours, even if it now has a true bargain-basement LTM PE of 672x.

UPDATE: The miss by GOOG and AMZN (accounting for 13% of Nasdaq market cap) is pushing indices lower after hours...

The S&P 500 And Russell bounced once again off post-December-Taper unchanged levels today but the Dow remains flat from 12/18 as the Nasdaq (led by exuberance in momo social media stocks as AAPL closed <$500) jumped the most in almost 4 months (though remains -1% on the year). The rally in stocks was simply remarkable for its tick-for-tick tracking of USDJPY and EM FX and the S&P was unable to make significant progress past its pre-Turkish-rate-hike levels. Treasuries sold off but remain 3-5bps lower in yield than when Turkey was "fixed". The USD rallied on EUR and JPY weakness (but was almost entirely dead once Europe closed). Precious metals were manhandled instantaneously lower at 8amET then spent the rest of the day trying to recover. Stocks did tumble into the close to recouple with USDJPY but bad news was great news it seems...(for now)

“J.C. Penney has a lot of levers they can pull to get the customers back," Bill Miller gleefully told a Schwab conference in November as he bought JCP bonds. Spreads on those bonds have risen over 200bps since then. However, it was the embattled Legg Mason guru's appearance on CNBC in mid-December that sparked re-exuberance as everyone jumped on his "undervalued" bandwagon and lifted the stock into year-end. Today, back under $6, JCPenney is once again at fresh 33 year lows. Those that followed Miller are down over 25% on their 'investment'.

With President Obama’s State of the Union Address and its associated campaign prominently featuring increased minimum wage, tired arguments for raising the minimum wage are being once again retreaded. Unfortunately, they compound failures of logic, measurement and evidence.

When your manufacturing industry unions kidnap their business leaders, taxes reach extremes of duress, industrial production limps lower and unemployment hits record highs; it is hardly surprising that the world is a little nervous of piling its hard-printed cash into your country. But in the case of France, data reported by the UN shows the biggest collapse in foreign direct investment ever. Figaro reports that FDI fell to EUR 5.7 billion - a drop of over 75% year-over-year - and the lowest since 1987. Ironically, Spain's FDI rose 37% and Germany's quadrupled... Is France an Emerging Market now?

While everyone focuses on the turmoiling in Emerging Markets, a good, old standby is back - the periodic "debt ceiling" IMAX tragicomedy.  Recall that the debt limit, which has been suspended since October 17, is scheduled to be reinstated on February 8. At that time, the nation will be operating right at the debt limit, and the Treasury Department will use extraordinary measures to temporarily issue additional public debt to meet federal financial obligations as it always does during episodes of political posturing that without fail take place until the 11th hour, 59th minute, and 59th second. However, unlike last year when there was a 5 month interval between hitting the debt ceiling, and the day the Treasury's funds fully ran out - the infamous X Date - this time the emergency measures will only last a limited time. What this means when looking at a calendar, is that the Treasury may not have sufficient cash-on-hand to cover all obligations due as soon as February 28.

...Zimbabwe!

(Just yesterday, the government there announced that the Chinese renminbi (among other currencies) will become legal tender in Zimbabwe.)

This morning's utter collapse in pending home sales - a 6-sigma miss by 'economists' unaware that it was cold in December - has been ushered away on the back of "weather" reasoning. However, a glance at the chart below confirms this is total bullshit. As Goldman Sachs admits "broad-based declines by region suggest that colder-than-average weather was likely not the primary driver."