Archive - Feb 3, 2015 - Story

All day mainstream media has been crowing about Auto sales being mind-blowing... record-breaking... colossal... so we have a simple question... when Ward's released its US Domestic Auto Sales (SAAR) data this afternoon... why did it miss expectations and show a 2nd monthly drop in a row? January printed 13.31 million cars SAAR, missing expectations of 13.5 million and dropping from December's 13.46 million SAAR. Paging Phil LeBeau?

A few days ago we wrote that "Either Oil Soars Back To $88, Or Energy Stocks Have To Tumble By Over 40%." The basis for that analysis was a forward Energy Sector multiple which last week was just shy of 24X. It's time for an update because following today's latest surge in energy stocks, the most recent forward P/E multiple for energy companies is... well, see for yourself.

“It would have provoked a crisis without precedents in Argentina," exclaims a political analyst after, as The NYTimes reports, a draft of a warrant for the arrest of President Cristina Fernández de Kirchner - accusing her of trying to shield Iranian officials from responsibility in the 1994 bombing of a Jewish center - was found at dead prosecutor Alberto Nisman's home. The new revelation has further inflamed theories regarding the heightened tensions between him and the government before he was found dead, as "it would have been a scandal on a level previously unseen."

The devil is in the details: The market is likely too excited about falling rig counts. Even after the natural gas experience, the market fails to appreciate that the relationship between rig count and production can be deceptive. Headline rig count declines may look impressive, but as we look at the data, much of the drop in oil rig count has come in low yielding vertical/directional rigs – i.e. the low-hanging fruit. Even within horizontal rigs, much of the decline has come in lower performing plays or lower tier counties within high quality plays. In some cases, we’ve seen a reallocation of rigs between counties within plays. This was particularly prominent in Midland last week. The most productive rigs will likely remain as long as possible, esp where hedges are in place, until redeterminations or cash flow issues force additional cuts.

If the U.S. economy is now dependent on marginal lenders and borrowers, then it is exceedingly fragile. The cure for systemic fragility is not low interest rates forever--it's a market that transparently prices credit and risk for lenders and borrowers, qualified and marginal alike.

So much for the Greek "conciliatory proposal" story, driven by yesterday's FT article, and the catalyst for Monday's late day market surge.

For anyone who has traded RadioShack's bonds or stocks over the last decade or so, the constant threat of an LBO has been the bane of any fundamental analysis as one Credit Suisse memorably described it as "a company in a virtual state of constant collapse." It appears, with multiple default notices this week and the news that NYSE will suspend/delist trading in the ever-on-the-block company, that the 'LBO rumor' threat is over. With several firms (Sprint, Sanpower, and Amazon) mulling post-bankruptcy purchases, the concept of a pre-petition savior appears dead in the water...

As Crude's bounce gathers pace so the world's beaten-down commodity-currencies are exploding higher. Aussie Dollar has given back all its RBA rate curt losses, The Russian Ruble is soaring, and the Canadian Dollar isd back under 1.24 against the USDollar... The USD Index is now down 1.3% since Friday.

Moments ago ISIS released a video showing a Jordanian pilot captured by the Islamic State extremist group being burned to death.  According to AP, which could not confirm tha authenticity of the video, the clip was released on militant websites and bore the logo of the extremist group's al-Furqan media service. The 20-minute-long video "featured the slick production and graphics used in previous videos released by the group."

Great news!! Oil prices have "bottomed" and WTI is up over $52 now... from under $44 just last week. But... gasoline prices have surged almost 24% in the last 3 weeks... the biggest seasonal rise in over a decade. Does the US consumer want rising or falling oil prices?

Just hours after apparently settling its suit with the USA (not at all retaliation for downgrading them), S&P has taken the big red marker out on a slew of European banks:

• Downgrades: Credit Suisse, Barclays, Lloyds, Bank of Scotland, RBS, HSBC, and Ulster Bank
• On Watch Negative: Raiffeisen Zentralbank, MBank, Unicredit, Commerzbank, and Deutsche Bank

The driver of the shift in perspective is the apparent removal of the 'bailout put', as the prospect of "extraordinary government support" appeared less likely under recently passed bail-in legislation.

With the recent collapse of Treasury yields, the massive short position in bonds has been dramatically unwound (though there is still plenty left). However, there is the other "most crowded" trade in the world - Long The USDollar - that remains... but is starting to show some cracks in the armor. Despite the highest levels of Short EUR, Long USD since the very peak of the EU Crisis in 2012 and still massively long net dollar positions across sell-side OTC indications and CFTC exchange-traded positions, the last 2 days have seen the biggest drop in the USD Index since September 2013... is the world's most crowded trade about to unwind?

It is no secret that January was a bad month for bulls: it was in fact the worst start to the year in years, especially following that surprising last day selloff, which took the YTD drop as of January 30 to an unheard of, at least under global central-planning, -3.1%. It wasn't just the broader market: some of the more marquee hedge funds names also found it a tough time to navigate the transition of global easing away from the Fed to the ECB even as other central banks like the SNB lost all credibility, such as Fortress, Third Point, Perry, Maverick, Brevan Howard and various others, all of which had negative returns for the majority of the month based on HSBC data. But it wasn't all bad news: in fact, as the table below shows, the January outperformers generated higher relative returns than the worst funds of the month,

"It's a man-made tragedy, and the men who made it won’t fix it." So it turns out Lenin wasn’t just right that the best way to destroy the capitalist system is to debauch the currency. It’s also the best way, as Venezuela can tell you, to destroy the socialist one.