Archive - Jun 3, 2015 - Story

With bond yields spiking and the dollar dumping, one might think precious metals would be bid... but that anti-status quo reality will not do and so, gold and silver (and crude oil) are tumbling faster than Sepp Blatter's reputation...

Hint...

Dear Janet, you find yourself in a terrible conundrum.  You understand as well as anyone that managing the trickle-less down recovery and the resulting tenacious dislocation between the market and the economy is becoming unmanageably expensive; about $13T to date.  And while the hint of a rate hike over the past year has sent the dollar up some +15%, some suggesting a sign of strength for the American economy, it really is not helping the situation now is it??

Wendy's just took buyback mania to the next level when, earlier today, it announced it would buyback $1.4 billion of its shares, which amounts to just under 50% of its entire float!

A new research paper from none other than the IMF has a unique observation for heavily-indebted countries: "It is better to live with the debt than to pay it down." 

U.S. healthcare is unsustainable. That it will break in the next decade is predictable. We are collectively wandering the beach, picking up seashells, while a mighty tsunami wave is approaching that will wash everyone on the beach away. We can either deal with the lifestyle and cultural causes of our mounting ill health or be swept away when the system crashes.

Following last night's inventory build report from API, expectations adjusted to a 818k build for the DOE data this morning. However, for the 5th week in a row, DOE reported a draw (this time of 1.95 million barrels).  WTI Crude had rallied into the data but was still in the red from yesterday's close and spiked on the inventory news. However, once the machines had a chance to see that production rose once again - to a new cycle record - prices began to slide....

Two years ago, bank analyst Mike Mayo asked JPM chief Jamie Dimon a simple question: why should affluent customers not pick UBS over JPM due to a mismatch in capital ratios, to which Dimon's response was even simpler: "that's why I'm richer than you." To which we then added: "No logic, no rationale: all about the bottom line, which to Jamie at least is all that matters. The bottom line was indeed all, because as Bloomberg calculated overnight, over the past several years, Jamie Dimon quietly became not just "richer than you", but "much" richer: his net worth is now well over $1 billion!

But the post-weather bounce? Markit's Services PMI in May missed expectations and dropped for the 2nd month in a row to its lowest since January. This notched the Composite PMI also down to its lowest since Jan, leaving Markit warning "the US economy has lost some momentum after an initial bounce-back from weather-related weakness at the start of the year." Worst still, ISM Services thenprinted a notably disappointing 55.7 (against 57.0 expectations) - its weakest since April 2014. The breakdown shows weakness across the board with prices rising. Finally, we note that an incredible 75 of 79 'qualified' economists had an ISM Services estimate that was too high... extrapolated hope springs eternal until it is smashed on the shores of reality.

It appears Draghi's comments are not what the market wanted to hear.Bunds have crashed over 30bps in the last 2 days... the biggest 2-day spike since Oct 1998...

Bond yields are surging higher (in UST and Bunds) and stocks fading as Draghi offered a mere glimpse at more pre-commitments but warned:

*DRAGHI: MARKETS MUST GET USED TO PERIODS OF HIGHER VOLATILITY

10Y Bunds just hit 80bps, up another 9 bps today for a 2-day spike of a stunning 35bps!

The Ruble just hit 54/USD - its weakest since early April - as IFX reports a "large-scale" rebel offensive in eastern Ukraine involving 10 tanks and around 1000 troops. Ukraine's military has redeployed troops to halt this rebel offensive and has informed its international partners on the re-deployment which leaves The Minsk Accord hanging by a thread.

Despite all the reassurances by various leaders that any Grexit or Greek bankruptcy would be 'contained', Sigmar Gabriel - vice-chancellor and economic minister of Germany's SPD party - unleashed some uncomfortable truthiness yesterday. With Greek stocks up almost 5% today as hope springs eternal, Gabriel warned of nothing less than “gigantic consequences” for Europe in case of a Greek bankruptcy.

With last month’s failed (so far) breakout in the U.S. equity market, stocks are relegated once again to range-bound status. Essentially the market has gone nowhere since the beginning of the year and, by some measures, 2015 has been the quietest start to a year in over a century. One characteristic of the stagnant action has been a lack of out-sized daily moves in the market, up or down. This is the index’s longest streak without a 2% day since the one that ended on June 1, 2012 at…111 days.

After March's six-year high disastrous kitchen-sink trade deficit revised down to -$51.4 billion, April saw a bounce back to just $40.9 billion deficit (considerably lower deficit than the $44 billion expectation). The imporvment was driven by a big shift in imports - dropping 3.3% (after a 6.5% jump in March) as exports rose just 1% (which is still the most in 2015).