Archive - Feb 13, 2015 - Story

Once again the correlation between silver and crude intraday has asymptoted to 1. As Crude accelerates higher so silver has surged - bouncing off its 100DMA...

After six month so soaring confidence, UMich consumer confidence tumbled from 11 year highs by the most since October 2013 in January (despite the low gas price stimulus), printing at 93.6, missing expectations of 98.1 by the most on record. It appears survey-based 'hope' is catching down to hard-date-based reality of spending habits as the sheer idiocy of the low-gas-price meme is destroyed once again. The drop was led by a plunge in Current Conditions from 109.3 to 103.1 and towards teh future, fewer now expect higher incomes and those who have favorable business expectations plunged from 70 to 58 with a surge in people expecting "bad times" over the next 12 months.

China's January credit data hints that in some ways China is becoming like the US, and as ever more newly created credit money ends up in the stock market, is China about to follow the US and Europe and suffer a collapse in monetary velocity. Because whereas previously the biggest asset bubble in China was that of housing, now it is the stock market, which means that suddenly its monetary system is for all intents and purposes haunted by the same issues that affect western markets. So how long until China, too, which is battling both deflation and economic contraction, proceeds with outright monetary devaluation?

...as US Macro data hits a new 10-month low.

Having quietly tested the $52 level and brushed with green on the week overnight, crude traders have decided that a surprise European GDP beat is good enough to outweigh all the over-supply fears and pushed WTI to $53 (with Brent breaking above $61 - highest since 12/23).

Import prices dropped 8.0% YoY (modestly beating expectations of an 8.9% plunge) and 2.8% MoM. The last time import prices started to fall at this pace was a month after Lehman Brothers BK'd. Of course the crash of oil prices is largely responsible as imported fuel costs slumped 16.9% YoY - the most since Dec 2008 (petroleum -17.7%). However, even away from that the price of imported capital goods collapsed the most since March 2009 with the biggest rise in Japanese (foreign central banks) exported deflation since April 2013 (when QE really accelerated).

"Greece will make every effort to reach an agreement with its euro zone partners at Monday's meeting of euro zone finance ministers on how to transition to a new support program, its government spokesman said on Friday. "We will do whatever we can so that a deal is found on Monday," Gabriel Sakellaridis told Skai TV. "If we don't have an agreement on Monday, we believe that there is always time so that there won't be a problem." The reason for this rapid about face? "Senior bank officials have told Kathimerini that almost all the liquidity available to Greece (59.5 billion euros) has been absorbed and that banks’ total dependence on the Eurosystem amounts to 90 billion. The rapid deterioration in liquidity conditions has been attributed to the uncertainty that arose when the snap general elections were called as well as the new government’s inability to reach a swift agreement with the country’s creditors." As usual: money threatening to walk, walks.

Now that Europe has demonstrated that one can go NIRP and not crash the system, will the Fed - once its silly obsession with hiking rates in the summer only to launch even more easing and/or QE as the ECB did in 2008 and 2011 - follow suit and join a rising tide of "developed" world central banks in punishing savers for hoarding cash? In a note released last night titled "Revisiting Negative Interest Rates in the US", Goldman shares its thought on the matter. It goes without saying that Goldman is important, because whatever Goldman's econ team shares with Goldman's Bill Dudley over at the NY Fed, usually tends to become official policy with a 3-6 month lag.

• Greece will do 'whatever it can' to reach deal with EU (Reuters)
• ECB Urges Greek Political Deal as Emergency Cash Is Tight (BBG)
• Fighting rages in run-up to Ukraine ceasefire (Reuters)
• Eurozone GDP Picks Up, Thanks to Germany (WSJ)
• Two J. P. Morgan Executives Connected to Asia Hiring Probe Pushed Out (WSJ)
• Putin's High Tolerance for Pain and Europe's Reluctance to Inflict It (BBG)
• Indigestion Hits Top U.S. Food Firms (WSJ)
• Alibaba's Jack Ma seeks to reassure employees over U.S. lawsuits (Reuters)

Who would have thought all it takes for Eurozone Q4 GDP to print above expectations, even if by the smallest of possible margins - one which even the Chinese goalseek-o-tron bows its head down to in respect - which at 0.3% Q/Q was above the 0.2% expected and above Q3's 0.2%, was for Europe to admit it has finally succumbed to deflation. Oh, and for the ECB to admit the situation has never been more serious by launching Q€. Oh, and add the "estimated contribution" to GDP from hookers and drugs. Put all that together and on an annualized basis, the European economy grew by 1.4%. Whatever the reason, Q4 GDP was the best print since Q1, even as Germany blew not only consensus of 0.3%, but the highest GDP estimate of 0.6% out of the water when it reported that courtesy of a spike in spending, its economy grew by 0.7% in the fourth quarter, up from the near-recessionary 0.1% in Q3. That, together with QE and ZIRP now raging across the continent, was enough to push the DAX above 11,000 for the first time ever.