Archive - Feb 2015 - Story

Their evil knows no bounds...

The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery. That people opposed to even the tiniest increase in rates are resorting to hyperbole tells us that they too know this. The thinking seems to be that six years into near-zero policy, the only reason it hasn’t worked is because it hasn’t been tried long enough. Meanwhile, the dangerous side effects of year after year of artificially low rates continue to grow.

Is the SNB buying Euros to keep the mirage alive that Grexit is "managable"? EURCHF is up dramatically in the last 2 days, retracing 60% of the Swiss Franc's valuation surge against the USD...

Karl-Georg Wellmann, a lawmaker in Angela Merkel’s Christian Democratic Union has warned that, despite its efforts to avoid arms being provided to Ukraine, Germany "will no longer be able to stop weapons deliveries from from the U.S. and Canada." Almost too coincidental to these comments, CNN reports, the U.S. Air Force is sending its A-10 "tankbusters" back to Europe in order to "increase rotational presence in Europe to reassure our allies and partner nations that our commitment to European security is a priority." As Wellmann ominously concludes, seemingly confirming Putin's warning yesterday that if Kiev aims at a military solution, war will never end, "a large-scale war could develop out of that."

We've seen this kind of algorithmically-controlled oscillation before... What Happens Next?

"February 24 is expected to be the first crucial day for state finances, as projections of cash flows see state coffers starting to run dry on that date.  The state of cash reserves – not robust before – has deteriorated further in recent days due to a shortfall in revenues, as a 1-billion-euro hole in January revenues is putting the execution of the state budget in jeopardy and hampering the management of cash reserves. Given these figures, the Finance Ministry estimates that cash reserves will run out next Tuesday.

Who could have seen that coming... as we explained minutes after the Greek headlines hit yesterday, the Greek 'loan' extension was not news at all... and neither was Schaeuble's response...

Things on the West Coast Ports are going from bad to worse (for those who missed it read "Catastrophic Shutdown Of America's Supply Chain" Begins: Stunning Photos Of West Coast Port Congestion), and with no resolution in sight, it is now beginning to cripple the US economy. Here is not only a brief summary of how the near-strike is impacting various businesses across the US,  but also a map to track the congestion at Long Beach harbor in real time.

Germany's government has been "overtaken by arrogance" in its approach to debt negotiations, a Greek government source reportedly told Sky News. The senior Syriza politician likened Germany's current tactics to those of the Nazis, exclaiming "It's like being back in the 1940s, being asked to surrender." We are sure that will make negotiations run a lot smoother (but comes on the heels of various jibes at The Greeks by Wolfgang Schaeuble).

With a mere 0.2% rise in manufacturing production (missing expectations of a 0.4% rise), and capacity utilization printing 79.4%, missing expectations of a rise to 79.9%, it is no surprise that overall industrial production missed expectations for the second month in a row. Motor vehicle production fell 0.6% in January and construction supply fell 0.3% - the most in 10 months.

While the PPI report is full of useful, seasonally-adjusted data points, the two items the vast majority of American consumers should be most interested in are the prices of beef and veal, and the prices of alcoholic beverages. Here we have some good and bad news: the good news, is that while the beef/veal price index has risen to a new all time high of 255.2, the pace of annual increase is now slowing down, and is is now "only" up 24% from a year earlier. The bad news, is that the price of alcoholic beverages, after posting two straight months of annual price declines, has once again started rising.

Earlier today, we got a hint that hopes that the 5th dead cat "housing rebound" bounce have been indefinitely delayed after Mortgage Applications cratered by over 13% after tumbling 9% in the week before on even the most fractional of 10 Year yield increases. That hope suffered another embarrassing defeat moments ago when the Census Bureau reported that in January both housing starts and permits missed expectations, rising at 1070K and 1053K, respectively, once again missing Wall Street consensus of 1089K and 1067K. The reason: yet another drop in single-family housing. Because while multi-family, i.e., rental units, remained brisk and rose from 340K to 381K for the starts and from 360K to 372K for the permits...

The drop in the price of energy will be initially blamed for the 0.8% MoM drop in Producer Prices Final Demand (far more than 0.4% drop expected) and the most on record. However, ex-food-and-energy, PPI also fell 0.1% (missing expectations of a 0.1% rise) and ex-food-and-energy-and-trade-services, PPI fell 0.3% - so it's not just the energy price drop (even though fuels and lubricants dropped 9.3% MoM). In fact the biggest MoM drop was in furnishings, computer hardware, and TV, video, and photo equipment.

Last week, German equities soared to record highs with the Dax surpassing 11K, not only on the imminent arrival of the ECB's Q€ which provides a risk-less bid to all asset classes, but on news that a second Ukraine ceasefire had been achieved in Minsk. Well, just like the first Minsk "ceasefire", one can promptly forget the just as "successful" second one, because overnight, after a several week siege, the Ukraine town of Debaltseve finally fell to rebel forces with "troops of Ukraine’s Armed Forces laying down arms en masse,” according to Donetsk rebel official Maxim Leschenko says, cited by Tass news service.