Archive - Aug 2015 - Story

The three men shown left, who are not from Texas but in fact reside some 1,400 miles away from the “front lines” in North Carolina, allegedly "had a deadly plot to lure government forces into a trap," in retaliation for the Pentagon’s supposed plan to “use the armed forces to impose martial law in the United States."

All the hopes and dreams of bringing back the over-debted, over-consuming American Dream had rested upon The Fed's ability to 'stimulate' confidence via pumping equities higher to 'prove' everything is awesome. For a few years it seemed to work... until 2015. As Bloomberg's Consumer Comfort survey shows, the last 2 weeks have seen Americans views about their personal finances collapse at the fastest rate in 3 years - falling to 10 month lows (despite near-record high stock prices).

WTI Crude is back below $45 again this morning - pressing towards 2015 and cycle lows -after Goldman Sachs' Jeffrey Currie warns 'lower for longer' is here to stay, with price risk "substantially skewed to the downside." His reasoning are manifold, as detailed below, but overarching is oversupply (Saudi Arabia has a challenge in Asia as it battles to maintain mkt share, the Russians are coming, andother OPEC members want a bigger slice) and, even more crucially, storage is running out. As Currie concludes, this time it is different. Financial metrics for the oil industry are far worse.

Today, following another spike in negative news, it appears that the credit markets have finally woken up, and a quick look at Brazil's CDS shows that following today's spike to 314bps, the country's implied default risk is back to levels last seen in April of 2009! We expect more credit market participants to notice the depressionary developments in brazil, and as the country's CDS continue to blow out, many will start asking themselves: is Brazil the next Argentina?

What the data does suggest is while the BEA can change the methodology for calculating economic growth, a change in the "math" does not change the "reality."

Initial jobless claims rose modestly this week but remain near 40 year lows as hoarding continues, and job cuts are at 4-year highs. So, we ask, just what is going on in this chart?

While we await for the BLS to report another seasonally adjusted Initial Claims report which will be near multi-decade lows, a far more disturbing report was released moments ago by outplacement consultancy Challenger Gray, which has done a far better job of compiling true layoff data, and which reported that in July there was a whopping 105,696, up 136% from the 44,842 job cuts in June, and the highest in nearly four years, or since September 2011, which the last time there were more than more than 100,000 layoffs.

According to a transcript of an internal meeting of the China Banking Regulatory Commission, bad loans jumped CNY322.2 billion in H1 to CNY1.8 trillion, a 36% increase. Meanwhile, The PBoC will include loans made to CSF, China’s plunge protection vehicle, in its monthly loan data, meaning Beijing will pretend that the state-directed effort to artificially shore up the country’s stock market represents real, organic demand for credit.

Reading through the August inflation report two things seem to stand out:

1. The MPC is more optimistic on (domestic demand-driven) GDP growth – supported by growing wages, cheaper bank funding and growing house prices.  Indeed, they revised their growth projections slightly to the upside compared to May.
2.  The MPC has turned more cautious on inflation because of persistent commodity price weakness and, indeed, FX appreciation. This is reflected in their lower inflation projections.

• Trump at center stage as Republicans square off in first debate (Reuters)
• Cleveland Debate Offers GOP Hopefuls a Chance to Break Away from the Pack (WSJ)
• Bank of England Keeps Key Interest Rate at 0.5% in 8-1 Vote (BBG)
• Emerging stocks submerged, UK gears up for 'Super Thursday' (Reuters)
• No IMF decision on Greek bailout until autumn, Swedish rep tells paper (Reuters)
• Japan Heads Toward Nuclear Unknown With Post-Fukushima Restarts (BBG)
• Activist Ackman Takes $5.5 Billion Stake in Snacks Giant Mondelez (WSJ)

Today the Bank of England releases its rate decision, minutes and quarterly inflation report (QIR) all at 1200BST with the QIR press conference to be held by Governor Carney at 1245BST. Given the volume of information on offer, the release is likely to be met with volatility.

It has been more of the same in the latest quiet overnight session where many await tomorrow's NFP data for much needed guidance, and where Chinese markets opened weaker, rose during the day, then went through a mini rollercoaster, then sold off in the afternoon.  The Shanghai Composite and HS China Enterprises indices finished down .9% and .3%, respectively. Trading volume continued to be very subdued, running at half the thirty day average as some 20 million "investors" have pulled out of the market to be replaced with HFTs such as Virtu.  But while stock action has been muted, the story of the night so far is oil and the energy complex broke out of a tight overnight range early in the European session to continue yesterday's downward trend, seeing WTI Sep'15 futures fall below the USD 45.00 handle after yesterday's DoE crude oil inventories saw US crude output rise by 0.552%. As of this moment oil was trading at $44.72, just pennies above the low print of 2015.

Moments ago a far less liberal outlet than either the WaPo or the NYT, came out with its own interpretation of the ongoing FBI escalation involving Hillary, and according to the NY Post, "the FBI investigation into former Secretary of State Hillary Rodham Clinton’s unsecured e-mail account is not just a fact-finding venture — it’s a criminal probe, sources told The Post on Wednesday."

"What can we do?"

Reuters has taken an in depth look at Illinois' sprawling bureaucracy and discovered that the state "is home to nearly 8,500 local government units" which helps to explain why "the average homeowner pays taxes to six layers of government, and in Wauconda and many other places a lot more." The story also sheds quite a bit of light on why the state's fiscal crisis may ultimately prove to be intractable.