Archive - Mar 2015 - Story

The consequence will not be eternal virtual prosperity, but rather a wrecked accounting system for the operations of civilized human life. We’ve stepped across the event horizon of that consequence, but we just don’t know it yet. Our bet is that we start feeling the effects sooner rather than later; and when it is finally felt, all the Kardashian videos in this universe and a trillion universes like it will not avail to distract us...

Judging by the euphoric exaggeration and fanboyism on mainstream media this morning, today's Apple Watch (not iWatch, definitely not iWatch) unveiling promises to be "world-changing" for the 'wearables' industry (as well as numerous "first time ever..." comments). Of course, there are 'watches' on the market already, but as Reuters Jason Fields 'jokes', the Apple Watch, of course, does more. The face is high resolution and in color. It even has apps that allow you to do a few of the things you’d be able to do if only you could muster the strength to dig your hand into the front pocket of your jeans, or do a little digging in your handbag.

Single-name CDS performance suggests investors are buying the "opportunity" Citi and Goldman are selling, providing further proof that we truly will never learn.

Dear Mr. Market,

I’m writing to you about the sharp lift in equity valuations over the past month...

Mario Draghi is forced to buy "small" amounts of EGBs on first day of QE, casting further doubt on the viability of PSPP. If the ECB is unable to meet its monthly asset purchase targets expect chaos, as the market has spent the last several months front running the program and would be absolutely horrified if DOMO has to be downsized.

"Despite much hope that the current breakout of the markets is the beginning of a new secular 'bull' market - the economic and fundamental variables suggest otherwise. Valuations and sentiment are at very elevated levels which is the opposite of what has been seen previously. Interest rates, inflation, wages and savings rates are all at historically low levels that are normally seen at the end of secular bull market periods. Lastly, the consumer, the main driver of the economy, will not be able to become a significantly larger chunk of the economy than they are today as the fundamental capacity to releverage to similar extremes is no longer available."

We already know that the Bank of Japan will monetize 100% or just over of all Japanese gross sovereign bond issuance (source). As for Germany, on a run-rate basis, and assuming allocation based on the abovementioned capital key, it means that for the next 12 month period, assuming no major funding changes in Germany, the ECB will swallow more than a whopping 140% of gross German issuance! Or, said otherwise, the entities who will buy more than all gross German and Japanese issuance for the next 12 months, are the ECB and the Bank of Japan, respectively.

Following earlier comments from various Eurogroup members - after yesterday's dismissal of Greece's proposed "reforms" - ranging from Slovakia's "Greece needs to face the naked truth," to Dijsselbloem's "we seem to be losing time on Greece," and Schaeuble's "not a lot has happened on Greece," it appears Greece has quickly folded once again and acquiesced to EU's demands for harsher cuts. With cash unlikely to last more than 3 weeks and being unlikely to get the EU1.9bn in bond profits from the ECB (according to EU officials), Greek officials have stated that they are "willing to enrich" the list of reforms.

When stripping away the now traditional assumption fudges which have flooded every single data set and made virtually all the New Paranormal data meangingless due to its reliance on pre-Lehman crash demographic and labor participation assumptions, the reality is that not only is the American Dream now completely over, but that the American Nightmare has never been worse, because as BofA just calculated, the real US homeownership rate has never been lower!

One could argue America was conceived from intense frustration that ultimately led to separation. Fed up with what they perceived as excessive control by the Crown, colonists to the “New England”, in essence, seceded in 1776, and thus the United States was born. Now, there is a renewed and growing secession conversation brewing, this time fueled by a commodity: Natural gas. Infuriated by Governor Andrew Cuomo’s December decision to permanently instill a ban against hydraulic fracture stimulation, or fracking, residents in 15 communities in the Southern Tier of New York are discussing the possibility of redrawing the border between New York and Pennsylvania.

As Mario Draghi unleashes his trillion euro bond buying program - aimed from what we are told, at lowering risk premia in credit markets to stimulate the eurozone's economy from utter stagnation - things are not going according to plan. Away from Greece, peripheral bond spreads are all up 8bps on the day and stock indices are mixed on this first day of DOMO (Draghi Open Market Operations) Of course, the other reason for Q€ is to implicitly (because one would never explicitly admit to joining the currency wars) devalue the currency - thus improving competitiveness and exports for the EU; but that's not working out so well as Germany's exports dropped and missed by the most since August... this was not supposed to happen.

Following Friday's "great" jobs data - which tumbled stocks - investors were looking hopefully at this morning's Labor Market Conditions Index for any bad news that was good enough to hint that The Fed will stay lower, longer and extend liftoff just one or two more quarters... they were disappointed...

The financial news is astonishingly rosy: record trade surpluses in China, positive surprises in Europe, the best run of new jobs added to the U.S. economy since the go-go 1990s, and the gift that keeps on giving to consumers everywhere, low oil prices. So if everything is so fantastic, why are new orders cratering?

Whiting Petroleum - the largest oil producer in the Bakken shale formation - has caught some investors' (and TV talking heads) eyes this morning as it has jumped over 11% on speculation that its decision to put itself up for sale - as a "motivated" seller - somehow means the collapse in the share price will be reversed by some greater fool who sees "synergies." We wonder though... who exactly is going to buy this company that trades at a 1043x Forward P/E?