Archive - Apr 14, 2015 - Story

Amid just another morning melt-up in stocks and crude, we thought the following chart might help some with their investment decision-making process...

Just as we warned previously (here, here, and here), the knife-catching, contango-crushed, BTFDers that piled over $6bn into Oil ETFs have severely underperformed this year. The USO ETF has fallen by more than 9% since the start of the year, whereas front-month U.S. oil futures have dipped by less than 3% on account of roll costs, and as of last week, investors have started to exit this massive position en masse. As Reuters reports, outflows from four of the largest oil-specific exchange traded funds reached $338 million in two weeks to April 8 - the first since September and largest since Jan 2014. It seems Goldman was right about "misguided retail investors."

No doubt smarting from criticism about its lack of success in picking winners in alternative energy vehicles, the Department of Energy has given initial approval for a $269 million loan to a proven winner – Alcoa’s high-strength aluminum to make vehicles lighter and more fuel efficient. But the new loan came under immediate fire for being superfluous since Alcoa was proceeding with the plant with or without DOE assistance.

Since one should always do the opposite of what Goldman recommends (because that is what Goldman itself is trading), the following is a perfectly suitable, and free, substitute of the SQZZ ETF: all one needs to do is go long the stocks Goldman recommends to short, go short the stocks Goldman thinks will be squeezed, and wait for the money to roll in courtesy of Goldman's flow and prop traders.

The answer, as shown in the following charts from the IMF, is because the dotted "consensus" blue lines also known as simple trendline extrapolation, better known in the financial world as "Birinyi's ruler", sometimes just happen to diverge from reality.

Back in January we asked the following: “who will be the first to offer a negative rate mortgage?” As WSJ reports, this bizarre characteristic of the new paranormal is spreading throughout Europe on the back of Mario Draghi’s trillion-euro adventure in debt monetization land: "Tumbling interest rates in Europe have put some banks in an inconceivable position: owing money on loans to borrowers. At least one Spanish bank, Bankinter SA, the country’s seventh-largest lender by market value, has been paying some customers interest on mortgages by deducting that amount from the principal the borrower owes."

The post-retail-sales, opening ramp has been eviscerated as yet another data series suggests things aren't well in the US economy. US Business inventories rose more than expected in February (+0.3% vs +0.2% exp) but this held the crucial inventories-to-sales ratio at 1.36x - the highest since the Lehman spike.

Fool me three times...

Despite all the money-printing, bond-buying, ponzi-scheming; the looming reality of a possible Greek default is spreading rapidly across the rest of peripheral European bonds. Greek 3Y bond yields are up 167bps, breaking over 23% today. The last week has seen Italian, Portuguese, and Spanish bond risk rise 12-16bps - a dramatic move off such low Q€-driven bases. Already there is chatter that Spain's resurgent Podemos party will look to negotiate restructuring their debt, which merely confirms the fact that for all the bluster, EU leaders are scared stiff of the implications of 'allowing' Greece to exit...

Remember back at the turn of the year when NFIB Small Business Optimism was surging and the mainstream media proclaimed that jobs were coming back thanks to small business, and Obama stated "the shadow of crisis is behind us." Well, if March's Small Business Optimism index is to be believed... it's not. At 95.2 (missing expectations for the 3rd month in a row), this is the least optimistic small businesses have been in 9 months. Worse still, all those jobs that were going to be created by this optimism.. Hiring Plans dropped to 6-month lows.

"Good news" - best month in a year for retail sales... or "bad news" longest streak of misses since Lehman. It is unclear what the market is seeing in this data - Bond yields have plunged and the dollar is getting monkey-hammered (signalling expectations of lower for longer) but stocks are lower (less ZIRP punch in the punchbowl).

After 3 months of missed expectations and the first consecutive drop in retail sales since Lehman, retail sales rose 0.9% in March (missing expectations of +1.1%). While the 0.9% rise is the biggest since March last year, this is now the worst streak of missed expectations in retail sales since 2008/9. Ex-Autos, retail sales also mised expectations (rising just 0.4% vs 0.7% exp).

It appears being Special Adviser to Japanese Prime Minister Shinzo Abe comes with great prerssure to toe the line - as opposed to advise. Koichi Hamada yesterday said USDJPY 105 was "appropriate" and USDJPY 120 was "too weak"... that sent USDJPY tumbling. These comments were reiterated in the early Asia session and adding that he "doesn't think JPY will weaken much further." We wake up this morning and reuters reports that he has entirely flip-flopped his views saying now that "120 is appropriate," and that he " would not oppose further easing." It's clear someone got a tap on the shoulder...