Archive - Nov 2015 - Story

With Americans facing a day of travel and giving thanks tomorrow, President Obama is set to make a statement we presume urging everyone to get out and spend... but be more alert to bad guys...

The 2 Year auction was strong, the 5 Year auction yesterday was mixed, but one word can best describe demand for today's issuance for "curve belly" 7 Year paper: blistering.

The S&P 500 is up 0.44% in the last three days, a solid return for the buy-and-hold'ers thinking about long-term appreciation. However, under the covers of that move is, just as we predicted, a massive and accelerating short-squeeze is underway, dragging the "Most Shorted" stocks up 4.65% since Friday's open as investors bet increasingly on central-bank-inspired expectations that hedge fund blow ups will force domino-like, sequential short squeezes.

America: Land of the free and future home of censorship? A new study by Pew Research shows that American Millennials are far more likely to support the government banning offensive speech about minority groups than other generations.

"There were no warnings. Not via the radio, not visually. There was no contact whatsoever. That's why we were keeping our combat course as usual. You have to understand what the cruising speed of a bomber is compared to an F-16. If they wanted to warn us, they could have shown themselves by heading on a parallel course. But there was nothing. And the rocket hit our tail completely unexpectedly. We didn't even see it in time to take evasive maneuvres."

"This (bus bombing) is an evolution in the behavior of the terrorists, this time they attacked a symbol of the state and in the heart of the capital."

Confirming API's data overnight, DOE reports a build in overall crude inventory (961k barrels - less than API) foro the 9th week in a row but more worryingly a significant build in Cushing inventories (+1.74mm barrels) for the 3rd week in a row. This 'bearish' shift is offset for now by the biggest drop in overall crude production in 7 weeks.

As the chart below shows, new home construction has plateaued and has been in decline ever since February of 2015 when it posted its post-recession peak of 545K. But what is more troubling is that the median price of new homes tumbled from 307,800 in September, or the highest in the series history to just $281,500, the lowest in 13 months!

The world is changing in so many ways which is ignored by markets and commentators. The Paris event is yet another wake up call for the markets on geopolitical risk, for the under-investment in education and basic research, but most importantly for how we continue to ignore facts. First it will get worse... we are simply not prepared for geopolitical risk to matter for markets neither are we yet willing.

In the face of a collapse in the conference board confidence and ongoing weakness in Bloomberg's consumer comfort index, UMich confidence rose on the month to 91.3 (despite fading from its flash 93.1 print). While baffle 'em with bullshit continues, we note that Democrats and full-time workers confidence is lowest in at least a year.

Following US Manufacturing PMI's tumble to two year lows, amid slowing new orders and employment, Markit reports that US Services PMI rose to 56.5 - its highest since April. Amid a solid increase in job creation (low-paying compared to the job weakness in manufacturing) and improvement in business growth, the divergence between Services & Manufacturing is at its highest since Q3 2013 which presaged a complete collapse in Services.

After tripling down on Valeant by way of a synthetic short as we noted previously, which pushed Ackman's long to a grand total of 34.1 million Valeant shares, all it takes for Ackman to generate $100MM in paper losses is a modest $3 move lower in Valeant stock, which is what it has done this morning following a new report by Bronte Capital alleging that Valeant is still back up to its specialty pharma gimmicks, only this time instead of a "chess" theme, the Canadian company is using a cluster of pharma names linked to Stephen King books.

Despite weaker home sales, tumbling homebuilder confidence, and fading median home prices according to NAR, FHFA reports home prices in America rose 0.8% in September. Doubling expectations of a 0.4% rise, this is the biggest MoM price increase since March 2013's peak.

While initial claims collapsed 11k to 260k, practically cycle lows and the hovering at the lowest level since 1973. But in continuing claims, something is different. The last 4 weeks have seen continuing claims rise 2.85% - the fastest pace of increase since July 2013. Of course, none of that matters with a Fed set on hiking rates no matter what, but it is seasonally aberrant to see a surge of this scale this time of year.

If this data is accurate, and keep in mind the BEA has a habit of revising spending higher after it revises income, to "boost" GDP as we revealed last year, this means that the US consumer is hunkering down at an unprecedented pace, and the 5.6% savings rate is now the highest since 2012, suggesting not only are US consumer unwilling to spending much money, but are actively worried about what is coming just around the corner.