Archive - Mar 15, 2015 - Story

For those who follow the endless soap opera of domestic politics, the biggest storyo  the weekend, if so far unsubstantiated, is the Post's report that the person behind Hillary Clinton's shocking e-mail story leak, is none other than Obama's personal advisor, Valeire Jarrett. "Obama senior adviser Valerie Jarrett leaked to the press details of Hillary Clinton’s use of a private e-mail address during her time as secretary of state."

Even though the US has seen so-called 'strong' job numbers and Europe is forecast to grow 1.5% this year, Saxo Bank’s Chief Economist Steen Jakobsen says 2015 will be a lost year. That’s because the two supposed growth engines of the world - the US economy and emerging markets - will grind to a halt and slow Europe down in the process. As we already pointed out, for the first time since Lehman, US earnings are now expected to drop in 2015 - apparently confirming this second-half hockey-stick is now dead... and as Jakobsen explains in this brief clip, capital preservation remains a must going into the second quarter of the year... with 10Y Treasury yields expected below 1.5% by the end of the year.

It appears the 'people' are growing more and more dissatisfied with their corrupt and greedy leaders across the world. As we noted recently, Brazil's economy is imploding, consumer sentiment is at record lows, and with the Petrobras scandal providing a glimpse at just how deep the corruption might go, Brazilians are revolting. Hundreds of thousands are crowding the streets in several regional Brazilian capitals, dominated ironically by the middle and upper classes. Demands for "Dilma Out" and "Impeach Dilma" are also interspersed with calls for a quasi-coup and "military intervention."

It's a total shock that maniacs who borrow nearly 100% on interest only terms to lose rental money to speculate on housing capital gains would love low interest rates. And with the lowest mortgage rates in Australian history, coinciding with the sloppiest lending standards in Australian history, combining with the highest property prices in Australian history, added to the highest household debt to income ratio in Australian history, what would you expect the biggest idiot of a treasurer in Australian history to do?

In the last few weeks, we have seen what looks like a transition from deflationary behavior to a more traditional behavior in which gold acts as the "anti-dollar". I don't think this represents a sea-change--I still think there is more deflation to come. But we might see a change in behavior for some time before deflation returns.

No matter how bad the overall profitability picture got, S&P500 earnings per share (assisted almost exclusively by a record amount of stock buybacks in 2015 putting downward pressure on the PS in EPS) would grow by the tiniest of amounts, just so the profit recession stigma could be avoided in a world in which the stock market is the last remaining bastion of faith in central planning and confidence in the economy. No more. Overnight, Deutsche Bank finally did the unthinkable, and "broke the seal" of optimistic groupthink, when its strategist David Bianco became the first sell-sider to forecast that not only will 2015 EPS not grow (at 118 on a non-GAAP basis, this will be unchanged Y/Y), but "down a bit ex bank litigation costs."

There are signs that crude oil production in the US remains strong, despite the strong correction in prices recently. The American Association of Railroads (“AAR”) publishes rail traffic data for a variety of commodities in the US and Canada. The subset for petroleum and petroleum products can provide a sense of crude oil volumes being railed across North America (although it also includes refined products like gasoline, distillates, jet fuel and so on). Here’s the latest monthly data for the US.

"Dear President Obama, Senators, and Members of Congress:

Americans now owe $1.3 trillion in student debt. Eighty-six percent of that money is owed to the United States government. This is a crushing burden for more than 40 million Americans and their families.

I urge you to take immediate action to forgive all student debt, public and private."