Archive - Feb 2015 - Story

The earnings season is all over except for the shouting, but the outcome doesn’t remotely validate Wall Street’s happy times narrative. Reported Q4 earnings for the S&P 500 companies (with about two-thirds reporting) stand at $25.02 per share compared to $26.48 in the year ago quarter. That’s right. So far Q4 profits are down 5% but shrinking corporate profits is something that you most definitely have not heard about on bubble vision. But that’s just the tip of the iceberg. We have had a tremendous inflation of PE multiples during the last three years in anticipation, apparently, of the US economy hitting escape velocity and the overall global economy continuing to power onwards and upwards. As is evident from the financial news and “incoming” data, however, that presumption is not remotely correct.

The chart below, which presents not only the total amount of sovereign gold holdings, but indicates the percentage of the monetary base backed by gold reserves, shows something rather stunning.

For the 2nd time this week, the most-crowded trade in the world is getting exorcised. Just as we saw on Tuesday, The US Dollar is getting monkey-hammered lower driven by heavy buying of EUR (and a stop-run at 1.1500). CAD is also well bid (back under 1.24 against the USD). JPY is the only major that is ignoring this USD dump and is lower on the day... supporting the fundamentals of equity confidence.

Perhaps it is a coincidence that a day before John Kerry's arrival in Kiev (a visit which "coincided" with a 35% devaluation of the local currency) where among other things, he was supposed to discuss the possibility of official (as opposed to unofficial) deliveries of US "lethal support" to the civil war torn and now hyperinflation country, that Russia decided to put its nuclear ICBMs on combat patrol missions in various Russian regions. Specifically, according to Tass, "About 700 units of military equipment, including launchers are deployed in the positioning areas in the Tver, Ivanovo, Kirov, Irkutsk regions, as well as in Altai Territory and the Mari El republic."

“Elections change nothing,” said Wolfgang Schäuble, Germany’s tough-minded finance minister. He was talking about Greece, but he could have been talking about the entire EU racket. What else do the people absurdly known as “experts” have to do to convince us that they don’t have all the answers? The euro was their great endeavour, for Heaven’s sake. Yet, even now, they won’t admit that it was a mistake. Distrust of the masses is in the EU’s genome.

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, as McKinsey explains in their latest report, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. They pinpoint three areas of emerging risk: the rise of government debt, which in some countries has reached such high levels that new ways will be needed to reduce it; the continued rise in household debt; and the quadrupling of China’s debt, fueled by real estate and shadow banking, in just seven years... that pose new risks to financial stability and may undermine global economic growth.

Deflation goes hand in hand with releasing the individual from the debt enslavement that was created with the monetary policies of the past 100 years. Nigh unlimited printing of money has become the orthodox strategy to avoid deflation. Deflation was made the scapegoat for all sorts of economic ills in a century of pro-inflation propaganda. For deflation to happen government interference in money and the economy needs to stop. The endorsement of deflation goes hand in hand with safeguarding liberty. “Paper money has become the technical foundation for the totalitarian menace of our days.”

That didn't take long: just hours after Greece entered the ECB countdown mode, with now just 23 days until midnight on February 28, when the ECB is set to yank the final pillar of liquidity support, the ELA - as it has warned before - it is time to start contemplating Plan B, or rather plan Z. A plan, which as described by Nordea's analyst Jan von Gerich, would be quite unpleasant for that nearly extinct class of Greeks, bank depositors, because the "plan", or rather blueprint, is a well-known one: capital controls.

The biggest short squeeze in 15 months appears to have solved the 'status quo' concerns that "everything is awesome" just like The Fed says. Following Nasdaq's brief leap into the green yesterday, this morning's melt-up has dragged The Dow, S&P and Nasdaq into positive territory for the year... just a good job macro- and micro-fundamentals are so supportive...

UPDATE: And Russia reiterates its willingness to aid Greece financially... RUSSIA WOULD CONSIDER AID TO GREECE, NO REQUEST MADE: SILUANOV

While Greek finance minister Yanis Varoufakis' comments that "we will never ask for financial assistance in Moscow," which notably does not deny acceptance of aid if offered, and Greek Minister of Energy Panagiotis Lafazanis adding that Athens opposes the embargo imposed on Moscow, "we have no disagreement with Russia and the Russian people," it is perhaps not surprising that, as Vedemosti reports, Russian President Vladimir Putin spoke by phone with the new Prime Minister of Greece Alexis Tsipras, congratulated him on taking office, and invited him to Russia.

"Most Shorted" stocks are now comfortably green on the year after the last 4 days have seen the biggest short squeeze in 15 months. Today alone, "most shorted" stocks are up 1.8%. Welcome to the new normal dash for trash on hopes that Greece is "fixed", Q€ "works", and despite dismal US macro data, it will be the economic engine of the world...

And in 3...2...1... "oil is stabilizing"... this is it...

It has become a weekly thing now. In its desperation to preserve the EURDKK peg, the Danish central banks has cut rates into negative, then cut them again, then again last week, and moments ago, just cut its deposit rate to negative one more time, pushing NIRP from -0.5% to -0.75%, its fourth "surprise" rate cut in the past 3 weeks!