Archive - Jan 6, 2015 - Story

Albuquerque police officer Lou Golson was shot by a motorist during traffic stop. According to criminal complaints, Golson suffered a gunshot wound in the abdomen. A gunshot to the chest and two other gunshots to his left side did not penetrate his bullet proof vest, the complaint said. However, Golson broke a left femur and suffered a broken wrist during his fall.

It’s no longer about which factors bring down oil prices, that’s old news; it’s about what oil prices bring down. The oil price drop is a much bigger event than the US subprime housing crisis, it’s bigger than everything put together that happened in 2008. And this time, central banks are lame sitting ducks. Omnipotence is a harsh mistress. She tends to backfire.

Just a few short hours after a series of deep, if not very strong, eartquakes shook north-central Oklahoma, moments ago the ground zero of the US energy industry, the city of Dallas, TX, felt the ground shaking. According to the USGS, this was due to a 3.5 magnitude quake, which stuck at a depth of some 3.2 miles below the Texas city.

From Bill Gross: "I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over....  Be cautious and content with low positive returns in 2015. The time for risk taking has passed."

Another quarter down, which means we can once again assess where the forward P/E multiple of the S&P stands relative to the previous two market bubble peaks.

It was less than a week ago when Zero Hedge broke the news that for CNBC, 2014 Was The Worst. Year. Ever. Much to the embarassment of CNBC, its staunch defender David Rosenberg, and not to mention its advertisers who realized they overspent substantially for the reach they were promised and received instead, the report promptly went viral. Five days after our Nielsen-sourced report before the Comcast-owned channel announced it would no longer be subject to the humiliation of Zero Hedge periodically revealing its crashing viewership and, as WSJ revealed today, "CNBC will no longer rely on TV ratings specialist Nielsen to measure its daytime audience, beginning later this year. Instead, it has retained marketing and research firm Cogent Reports for the task."

Hope springs eternal that 2015 is the year that the US economy stretches its escape velocity growth as consensus growth expectations at 2.9% are still at their highest since 2005 (although world GDP expectations are falling rapidly). However, as Bloomberg's Rich Yamarone explains, with 5 of the Top 10 economies in the world in or near recession, the wall of worry can be constructed as follows...

Earlier today, a small Denver-based precious metals dealer AmagiMetals announced something curious: it would paid its staff in Bitcoin. As it reported in its press release, "its entire staff will voluntarily accept a portion of individual employee paychecks in Bitcoin in 2015 through a new service called Bitwage. CEO of Amagi Metals Stephen Macaskill said the company is taking this action to advance its ability to function fully in Bitcoin going forward. Macaskill will accept $40,000 of his annual salary in bitcoin to demonstrate his support of Bitcoin." Whether it is a marketing gimmick, or the PM dealer is one of the few companies to put its (electronic) money where its ideological mouth is, and press for a world without dollar intermediation remains to be seen, however, for the sake of its employees we hope they did not put any part of their bonuses in the Bitstamp exchange which as we learned overnight, was the next big Bitcoin exchange to suffer a major hack following the now defunct Mt. Gox, and where a little over $5 million in bitcoins were stolen.

Just when you thought it was all over... Having bounced post-CBR intervention and somewhat stabilized, the re-collapse in crude oil prices and continued weakness in Russian macro data provided just the impetus for a re-plunge in the Ruble (back above 63.5/USD) and surge in Russian bond yields (back to 14%). While Russian stocks are also retesting towards recent lows, it is Russian CDS that is the most telling as it closed to day at 595bps - the widest since March 2009. While these violent gyrations are new for recent history, they are not a new phenomenon, but are quite characteristic of the country’s financial history.

For the last two and a half years since June 2012, the best strategy for global equity investors has been to buy on dips. The strategy worked because of a very high level of market resilience combined with a (sometimes excessively) optimistic environment. As a result, over the last couple of years markets have tended to recover very quickly from shallow corrections. However, steeper and longer corrections appeared to be back, and investors appear to be thinking twice before buying dips.

Think Texas and Pennsylvania have a problem with plunging oil prices, don't look North. West Canada Select (Heavy) crude oil prices have collapsed to below $35 per barrel (the lowest since Feb 2009). This is a 60% plunge in the last 6 months and has left the industry stunned. While US rig counts have fallen for the last few weeks as the lagged response to falling prices finally catches up to reality, the Canadian oil rig count has never been lower for the first week of January. Will the Canadian housing bubble be next?

The more capital that is driven into risk assets, the greater the financial devastation when the asset bubbles all pop, which they inevitably will--and not in some distant future. It is impossible for everyone to sell at the top before the implosion; the assets are owned by someone all the way down.

For those few who missed the theater from the Capitol you are in luck with the live webcast below.

Few will ever forget the ferocity of the October short-squeeze in US Treasuries that flash-crashed yields. As Nanex notes however, today's yield plunge (price surge) is starting to shape up as an extreme flight-to-safety squeeze. As we noted earlier, US Treasury short positioning into this week was its highest in over 4 years...