Archive - Jan 2014 - Story

It's that cold. BBC reports that Firemen tackling a blaze in Minneapolis, where temperatures have been below -20C, saw the spray from their hoses turn to ice as it hit the building.

• Heavy snowstorm hammers northeastern U.S. (Reuters)
• Coins Remain a Bright Spot for Gold (WSJ)
• Gross’s Mistake on Fed Taper Echoes Across Pimco Funds (BBG)
• China December services PMI falls to four-month low (Reuters)
• General Mills Starts Making Some Cheerios Without GMOs (WSJ)
• U.S. considers flammability risk of Bakken crude after accidents (Reuters)
• China Mobile’s Costly iPhone Deal with Apple (WSJ)
• Hezbollah Upgrades Missile Threat to Israel (WSJ)
• UK House Prices Cap Best Year Since 2006 as Mortgages Surge (BBG)
• China tells police to be loyal to party amid graft crackdown (Reuters)

Snow and cold weather... in the Northeast... in January. Surely, such an unprecedented development in the New Normal should predictably justify explaining away at least a 1% miss of Q1 GDP (which when inventory destocking is factored in, will likely come in negative). Still, 20 inches of snow dropping in one night is somewhat abnormal, especially when one adds a blast of cold air to accompany them, and explains why even the area major airport hubs - JFK in New York and Logan in Boston - are all closed currently, while key NYC transportation hubs, I-84 and the LIE, closed at midnight and won't open until 8 am.

In a day that will be remembered for the first major snowstorm to hit New York in 2014 and test the clean up capabilities and resolve of the city's new populist mayor (not starting on a good note following reports that JFK airport will be closed at least until 8:30 am Eastern), it was only fitting that there was virtually no overnight news aside for the Chinese non-manufacturing PMI which dropped from 56.0 to 54.6, a new 4 month low. Still, following yesterday's ugly start to the new year, stocks in Europe traded higher this morning, in part driven by value related flows following the sell-off yesterday. Retailers led the move higher, with Next shares in London up as much as 11% which is the most since January 2009 and to its highest level since 1988 after the company lifted profit forecast after strong Christmas trading performance. Other UK based retailers with likes of AB Foods and M&S also advanced around 2%.

Despite the government's ongoing efforts to cut gold imports - aimed at closing a widening current account deficit among other status-quo-questioning factors, the following brief clip from Bloomberg TV sums it all up perfectly - For this country of over one billion, "Gold is, was, and always wlll be... money." And now, following import bans and higher taxes, the government is considering restrictions on the holiest of holies - wedding gifts, and "legislating against love."

2014 is upon us. For a person who graduated from Georgia Tech in 1961, a year in which the class ring showed the same date right side up or upside down, the 21st century was a science fiction concept associated with Stanley Kubrick's 1968 film, "2001: A Space Odyssey." To us George Orwell's 1984 seemed so far in the future we would never get there. Now it is 30 years in the past. Did we get there in Orwell's sense? In terms of surveillance technology, we are far beyond Orwell's imagination. In terms of the unaccountability of government, we exceptional and indispensable people now live a 1984 existence. In America today people with power are no longer accountable. This means citizens have become subjects, an indication of social collapse.

While the taper is apparently priced in, someone forgot to tell Emerging Market FX markets again as from India to Indonesia and from Thailand to the Philippines, currencies are tumbling against the USD. While most of Asian FX is weakening, the JPY is surging - its biggest gain in 4 months. Of course, with Japanese cash markets still closed, futures are bearing the brunt as Nikkei 225 futures are down 450 points from New Year's Eve's high close, filling the Christmas Eve gap perfectly.

All it took was a year or two of extremely obvious "catches" of leaked data for the government to begin to decide that perhaps, just perhaps, it is time to end the press lockup for each week's initial jobless claims data. As the WSJ reports, the original idea behind lockups was to give reporters time to digest complicated economic reports to produce accurate reports for the public. In the past decade, news organizations have also built expensive networks to send government data to high-speed investors who can make trades on the data before members of the public can react. Now, however, the BLS believes, "government data is for the public good and it is paid for by taxpayer dollars. There must be a commitment to a level playing field."

For generating the greatest "wealth effect" and highest return of any global stock market in the world in 2013, the Caracas stock exchange, which closed the year at the ripe level of 2.7 million, is getting surprisingly little attention or love (maybe because unlike other countries, here unpleasant inflation from currency debasement is a coincident indicator resulting in such things as a shortage of toilet paper). Because after all isn't it an economist and monetarist's dream to achieve a 480% return in one year based on simply printing money?  Supposedly, the answer is no. But for whatever reason, since nobody talks about the massively successful Venezuelan stock market, which in the modern era is second only to the even more "successful" Zimbabwe stock market, it bears noting that earlier today, quietly, the Caracas stock market announced it would proceed with a 1000 for 1 stock, er, index split.

After multiple months of positive acceleration, Goldman expect the Global Leading Indicator to continue to stabilize around current levels in the coming months. The infamous Swirlogram shows that the last 3 months have seen the indicator in "slowdown" mode - which Goldman optimistically notes is on the border of 'expansion' also...and while they see no clear evidence of further acceleration, they see overall level of growth at solid levels.

While the growth of inequality in America has been heavily discussed here, it was Stan Druckenmiller's outbursts (and warnings that "from beginning to end - once markets adjust from these subsidized prices - that the wealth effect of QE will have been negative not positive") that brought it more broadly into the average American's mind. QE, taxes, income disparity, and entitlements are four major means by which wealth is transferred from the poor and the middle class to the rich. The following simple chart explains it all...

Margaret Macmillan recently warned there are dangerous parallels between the year WWI broke out and today. Pivoting off the well-know Mark Twain adage that history does not repeat itself, but does rhyme, Macmillan suggests that the one-hundredth anniversary of World War I encourages us to reflect on the “valuable warnings” of the past. The actual and potential conflicts in the year ahead are many, and some of the same structural forces that lead to the Great War a century ago will be prevalent in 2014.

Worried about being priced out of the housing market once again? Concerned that longer-term fixed rates will rise? It seems the general public, guided by the always full of fiduciary duty - mortgage broker - has reverted to old habits and is charging back into Adjustable-Rate Mortgages. As The LA Times reports, ARMs, which all but vanished during the housing bust, are back - accounting for 11.2% of homes purchased in November (double that of the year before)! While not the Option Arms of yesteryear, it would appear people, pushing for lower monthly payments, remain completely oblivious to the word "adjustable" when they shift their risk to the shorter-end. Though, as the 'experts' continue to tell us, rising rates won't affect housing negatively - not at all...

As recently as October, we joked that the "best-performing" job category in the US was also the most miserable one - i.e., "bartenders and waiters", also known as jobs which often times get paid below minimum wages and rely on the goodwill of their customers for tips to survive. And indeed, as of November, there were a record 10.4 million waiters in the US, representing a record 45 consecutive monthly increases in this job category - hardly the stuff robust recoveries are made of. However, it turns out the joke may be on us after all because as the WSJ explains, "Waiting Tables at Top-Tier Restaurants Is New Career Path for Ivy League and Culinary School Grads." It appears that gone are the days when every Ivy graduate's fast-track to stardom dream was to become a banker (or in the worst case, a corporate lawyer). And with Wall Street's increasing conversion into a utility, the aspirations of the best and the brightest will progressively shift elsewhere. But waiting tables? Well, as it turns out that's where the money is because "head waiters at top-tier restaurants can earn from $80,000 to as much as $150,000 a year including tips, according to industry executives."

Italy's anti-austerity Pitchfork movement, who described Italy as being "enslaved by wealthy Jewish bankers," has come under fire for "shamelessly recall[ing] a historical period characterised by death, violence and denial of the most elementary rights." The nation's Jewish community, writing in La Repubblica, said the Pitchfork leader's remarks demonstrate a "deeper sense of discomfort" fuelled by "the most violent and grimmest anti-Semitic stereotypes". Despite Italian stock and bond markets surging to multi-year highs, IB Times notes that mass demonstrations continue to rile the company's economy as Pitchfork followers demand the total removal of the ruling political class.