Archive - Jan 14, 2015 - Story

If the Barclays Skyscraper Index, which posits bursts of skyscraper construction are a harbinger of great economic collapse and market crashes, is accurate, then the world is in for a, well, world of pain. And nowhere more so than in China. As Skyscraper Center reports, 2014 saw an all-time high record 97 buildings of 200 meters or more completed with an increasing shift towards Asia (with a stunning 76% of all tall-building construction). For the seventh year in a row, China completed the most (58) skyscrapers... mal-investment boom much?

Thing is, that whole line about how lower oil prices were going to be a boost for our economies was ignorant from the start. And there’s still plenty people believing just that. That may explain those EU stock exchange gains. That sort of thing all comes from people who don’t understand to what extent oil is pivotal to our societies. We’re not in 2008 anymore, when an oil price drop actually helped us crawl out of a tight spot. We’re $50 trillion down the road, and there won’t be another $50 trillion, or another road. For all intents and purposes, we are the center today, and we cannot hold this way.

In October, BBRY shares spiked (and dumped) on rumors that Lenovo had made an offer. Today, after a detailed report from Reuters explained that Samsung executives had offered to takeover the troubled phone-maker (or whatever they call themselves nowadays) and the stocks spiked up nearly 40% - perfectly running stopw through the mid-Nov highs and squeezing shorts out of the market... and now - after hours - BlackBerry issues a statement denying the whole thing... rigged much?

Yesterday we highlighted the 'odd' behavior of the Airlines - cutting jobs to cut costs (but but but low fuel prices?) and seeing traffic and revenue per seat drop (but but but gas 'tax cut' spending?). It appears 2015 has heralded a broad realization that perhaps - just perhaps - the narrative of "low oil is unambiguously good" is not correct...

For what appears to be the first time on record, Powerball Lottery Sales declined year-over-year. As the following slides show, lottery sales declined 19% in FY14 vs FY13 and even more stunningly reflective of a nation whose disposable income (and hope) is in such short supply, sales in the first half of FY15 are down 40% from the first of FY14. As LaFleurs concludes, this will make it very challenging for most Lotteries to manage their budgets...

Yesterday, the IRS announced the International Data Exchange Service. If you’ve not heard of it, it’s is an outgrowth of the Foreign Account Tax Compliance Act (FATCA), which requires every single bank in the world to get in bed with IRS to share information about customers. We’ve said this over and over, FATCA is probably the dumbest law in the history of the United States. And we don’t say that lightly, because there’s definitely stiff competition. Like any other bankrupt government, the US government has taken to intimidating its own citizens and the entire world in an attempt to make ends meet. But the fact is that tax revenues actually haven’t improved at all. It doesn’t take a rocket scientist to realize that the rest of the world is one day going to create its own alternative system. One that would no longer rely on the US dollar.

Yesterday we discussed the crackdown on 'extremism' around the world (and its potential implications for freedom). Today, as The Guardian reports, notorious French comedian Dieudonné M’bala M’bala is now intimately aware of the implications, having been arrested for being an “apologist for terrorism” after suggesting on Facebook that he sympathised with one of the Paris gunmen. As The Independent reports, French Prime Minister Manuel Valls attacked Dieudonné, calling him a "peddler of hate and said there should be no confusion between the 'impertinent' satire of Charlie Hebdo and 'anti-semitism, racism and negationism'." In an open letter, the comedian claimed on Tuesday that he had been misunderstood.

Remaining fully invested in the financial markets without a thorough understanding of your "risk exposure" will likely not have the desirable end result you have been promised. All five of the charts below have linkages to each other, and when one goes, they will all go. So pay attention to the details.

WTI Crude futures are up almost 6%, spiking above $48.50 into the close and options expiration... no fundamental catalyst for now... Once again, crude futures have been 'spoofed' all day so this is hardly a surprise.

Despite proclamations that US Treasury Bond yields can't drop any further... surely... At 1.27%, US 5Y Yields are higher than 18 other developed nations in the world. Switzerland's 5Y yield is the lowest in the world at -21.9bps (and only 6 developed nation bond yields are higher than the US). Still think US yields are 'too low'?

The standard modest or moderate growth comments of the Fed's typically boring Beige Book were awkwardly interspersed with a narrative-interrupting 45 mentions of concerns about oil's price plunge impact...

"As for the blessed Battle of Paris, we ... claim responsibility for this operation as vengeance for the Messenger of God," said Nasser bin Ali al-Ansi, a leader of the Yemeni branch of al Qaeda (AQAP) in a video recording posted on YouTube. As Reuters reports, this was the first time that a group officially claimed responsibility for the attack. The group also mocked the 'unity' rally in Paris on Sunday, saying the shock on display showed feebleness: "look at how they gathered, rallied and supported each other; strengthening their weakness and dressing their wounds," it said of Western leaders who attended the event.

Things are escalating... Energy credit markets are pushing back towards record high spreads, copper is pushing back to the overnight lows and gold and silver are flat. US equity markets are the big movers with The Dow down well over 300 points today (and nearly 700 points in the last 27 hours) and the S&P now down almost 5% from its highs. Treasury yields are 8-10bps lower on the day with 30Y yields at record lows and 10Y close.

It's not been a good six months for Harold Hamm. The billionaire CEO of Continental Resources has seen his massive stake in the company cut in value by almost 60% since the start of September and - maybe even more distressing - agreed the largest divorce settlement ever. Hamm's divorce lawyers recently said he took out a personal loan to fund the $1 billion settlement with ex-wife Sue Ann Arnall, but as Reuters reports, a regulatory filing by the company today reveals Hamm pledged 68.7 million of his company shares as collateral for the loan on Jan. 9, or around 18.5% of the outstanding shares.

The current premise is that global equities markets will rise regardless of economic fundamentals. Money must flow into equities [perceived as the only asset class capable of producing “acceptable” returns] because the alternatives offer virtually no return…with interest rates pinned near zero in most western economies. Just buy any equity [akin to dart throwing] and a “greater fool than you” will buy after your purchase, at a higher price, ad infinitum... thus ever increasing the asset’s value This is such an obviously flawed argument on so many levels... albeit, like almost any strategy, is surprisingly effective from time to time.