Archive - Feb 12, 2015 - Story

The monetary politburo has every reason to fear Rand Paul’s demand for a “policy audit” of the Fed. An honest one would show that its so-called “independence” has been monumentally abused in a manner which is deeply threatening to both political democracy and capitalist prosperity. Needless to say, we can’t have that audit soon enough. In short, what the nation really needs is not an “independent” Fed, but one that is shackled to a narrow and market-driven liquidity function. The rest of its current remit is nothing more than the self-serving aggrandizement of the apparatchiks who run it; and who have now managed to turn the nation’s vital money and capital markets into dangerous, unstable casinos, and the nations savers into indentured servants of a bloated and wasteful banking system.

Is it any wonder that The Greeks want to leave The Euro? One glance at the following chart and it is clear who the growth engine is and who the anchor is...

What's an equity investor to do these days?

Business inventories grew at a mere 0.1% in December, missing expectations for the 7th of the last 8 months. This is the slowest inventory growth since May 2013. Perhaps most worrisome is the drop in sales (down 1.1%) which slammed the inventory-to-sales ratio to its highest since July 2009.

Since the miserable US retail sales data hit, it appears the world's investors have decided that buying US stocks and US bonds is the thing to do...

It would appear the un-sourced rumors of Greek banks having used up their Emergency line of credit with the ECB are true. Following a hastily put together conference calls this morning:

• *ECB RAISES GREECE ELA ALLOWANCE TO EU65BN: FAZ

Up from the previous EUR59.5 Billion. It appears the stealth bank run in Greece is showing no signs of slowing.

When not even Tesla's non-GAAP adjustment magic, shown previously in the following "bridge", can boost sales or earnings any more to beat Wall Street expectations, one things is clear: as SocGen's Albert Edwards puts it "US corporate profits and sales are crumbling."

It's hard to avoid the feeling that the world is over-supplied...

As the noise of jobless claims data once again ripples through the narrative of unequivocally good low gas prices, initial claims in Shale States continues to trend higher. TX and PA saw the largest rise in claims (from the Shale States) lagged a week. Overall, initial jobless claims jujmped 24k to 304k (above the supposed Maginot Line demarcating the "everything is awesome" from the "we're gonna need a bigger QE") missing expectations by the most in a month. The Initial Claims trend appears to have seen a regime shift from lower to higher...

Following last month's narrative-crushing drop in retail sales, despite all that low interest rate low gas price stimulus, January was more of the same as hopeful expectations for a modest rebound were denied. Falling 0.8% (against a 0.9% drop in Dec), missing expectations of -0.4%, this is the worst back-to-back drop in retail sales since Oct 2009. Retail sales declined in 6 of the 13 categories.

With talk that Greek banks have hit their emergency lending limit with the ECB (which has prompted a teleconference this morning among ECB polcy-makers), it seems the newly-found position of negotiating strength for Greece (perhaps encouraged by China or Russia behind the scenes) has prompted more demands:

• GREECE'S SYRIZA CHIEF ECONOMIST JOHN MILIOS PROPOSES OVERALL EURO ZONE DEBT OVERHANG REDUCTION BY ECB
  
• ECB COULD BUY ALL EURO ZONE DEBT MATURING IN 2016-2020 AND ALL INTEREST PAYMENTS-SYRIZA'S MILIOS
• ECB WOULD FOOT THE BILL NOW, BUT BY 2040 IT WOULD BE ABLE TO ERASE ALL LOSSES THROUGH PROFIT RETENTION-MILIOS

Roughly translated - "Get back to work, Mr.Draghi" and monetize all of Europe's debt. With negative net issuance (i.e. central banks already monetizing over 100% of 2015's expected issuance) already here, this demand merely pushes the 'independent' monetary policymakers to enable more fiscal profligacy.

Confused by the whirlwind of conflicting facts, not to mention outright lies, leaks and rumors, surrounding the negotiations of what will either be the third Greek bailout of its first, and final, Greek exit from the Eurozone? The following summary should answer most questions.

We are living in an era where a single statement of truth will drive a pin into the global bubble of phantom assets and debts, and the lies spewed to justify those bubbles.

"Our downgrade is about more than execution risk; we note: (1) The profound drop in fuel prices harms the competitiveness relative to internal combustion engine vehicles of TSLA’s planned Model 3 mass-market car, the potential for which we believe accounts for the majority of today’s equity value; and (2) Competition is mounting – automakers at the recent Detroit Auto Show debuted a number of electrified vehicles, some of which appear directly aimed at the Tesla Model S (e.g., Mercedes C-Class Plug-in Hybrid), the X (e.g., Audi Q7 e-Tron Plug-in Diesel Hybrid), and the 3 (e.g., Chevrolet Bolt) – see takeaways from our walking tour of the show. We reduce our estimates on flow-through of 4Q’s softer sales and margin trends, and guidance for higher operating costs: 1Q15 goes to -$0.31 from +$0.93 and FY15 to $1.89 from $4.12. Our December 2015 price targetd-declines to $175 from $180." -JPM

• 'Glimmer of hope' for Ukraine after deal at Minsk peace summit (Reuters)
• Ruble Rebounds, Russian Stocks Surge on Ukraine Cease-Fire Deal (BBG)
• Greek PM Tsipras in Brussels as clock ticks on EU bailout (Reuters)
• Emerging-Market Currencies Rout Not Over for Traders (BBG)
• Little noticed, new Saudi king shapes contours of power (Reuters)
• In Wake of Financial Crisis, Goldman Goes It Alone (WSJ)
• AmEx Is Losing Its Millionaires (BBG)
• Thousands to Lose Health Insurance Over Residency Questions (WSJ)