Archive - Sep 2015 - Story

Following last night's 2.1mm barrel build forecast from API, DOE reported a bigger than expectd 2.6mm barrel inventory build. This is the largest 2-week build in crude stocks since April and has sent crude prices tumbling. On the other side, US production levels continue to drop (-0.9% this week) to its lowest level since January 2nd 2015.

With the war drums beating louder by the day, US officials are now warning that Russia's military buildup in Syria is "unprecedented" and is "beginning to look like Crimea." Meanwhile, the Kremlin has accused the US of "international boorishness" for Washington's "rubbish" attempts to characterize Moscow's relationship with Damascus unfairly.

S&P correlation algos: just tracking whatever is going up, tick for tick.

If you have been waiting for the market to send you “warning signals”, then you can stop waiting because it is happening right in front of your eyes.

The Wholesale Inventories-to-Sales ratio has now been stuck deep in recession territory since January as the mal-investment boom-driven deflation-beckoning dream of "if we build it they will come" inventory surges smashes into the ugly reality of peak-debt-based lack of consumption worldwide. Inventories dropped 0.1% in July (notably lower than the 0.3% rise expected and the biggest drop since May 2013), but worse still Wholesale Sales tumbled 0.3% (missing expectations of a 0.1% rise). So inventories dropped (bad for Q3 GDP) and sales dropped more (even worse) leaving July's 1.30x inventories-to-sales ratio remains a flashing red beacon of over-capacity and looming production cuts (especially in Automakers).

Exactly one month ago, in the aftermath of the Chinese devaluation announcement, we made a simple prediction. "Biggest immediate loser from China's devaluation: Brazil" Today, following the overdue, long anticipated, and yet "shocking" downgrade of Brazil by the S&P to junk, this prediction is coming true.

This is getting way too stupid. The Keynesian Chorus has launched a full blast trilling campaign, emitting an increasingly shrill cackle of warnings against a Fed rate hike. Yes, 80 months of pumping free money into the canyons of Wall Street is not enough. Why? Well, this is hard to type with a straight face, but according to the cackling gaggle of Keynesian Chicken Littles, the Fed has already tightened too much!

"The 17-year river [of reserve currency buildup and QE around the world] is no longer flowing," warns Appaloosa's David Tepper, and "turbulence" is now the norm. VIX 22 is too low - "expect surging volatility", 18x PE is too high - "margins are set to drop - I have problems with earnings growth and problems with multiples"

Simply put - "Flat stocks is not a bad place to be...unless central banks are on our side again, then every rally should be sold."

So much changes in three days. For proof look no further than just the last three days of Dennis Gartman virtual portfolio recommendations.

Apparently fed up with the persistent spread between the onshore and offshore yuan, China has decided to add one more spinning plate to its collection by intervening in the offshore spot market.

Anyone waking this morning will glance at US equity futures and happily note its unchanged-ness relative to weakness in Asia overnight. But behind the scenes of the last 12 hours was a total and utter farce of price discovery failure. S&P 500 e-mini futures have been halted twice (0551ET anbd 0612ET) in what one market observer exclaimed "looks like manipulation to me." So what exactly happened at 6:12am?

Of course, with Goldman's desk making millions in commissions executing AAPL's weekly, if not daily, buyback orders, the last thing Goldman would dare to do is issue a report that angers Tim Cook. But another problem may be emerging for AAPL: China. As a reminder, China recently became the biggest end-market for iPhone demand and any hints this may be jeopardized could have severe repercussions on the stock price.  Which is why we paid particular attention to the report overnight from China's finance ministry, which accused a China unit of Apple of underpaying taxes in 2013 by 452 million yuan ($71 million), "which comes as China toughens its stance on tax payments by foreign firms."

• Compare: S&P 500 Futures Advance After U.S. Stocks Ignored Global Rally (BBG)
• And contrast: Global Stock Rally Grinds to a Halt (BBG)
• And be very confused: Global Stocks Lower on U.S. Interest Rate Uncertainty (WSJ)
• Hilsenrath: Fed Wavers on September Rate Rise (WSJ)
• Time for more QE: Abe Adviser Says Next Month Good Opportunity for BOJ Easing (BBG)
• Brazil downgraded to junk rating by S&P, deepening woes (Reuters)
• Kiwi dollar tumbles after New Zealand cuts interest rates (Reuters)

It has become virtually impossible to differentiate between actual central bank intervention, hopes of central bank intervention, and how the two interplay on what was once the "market" but is now merely the place where money printers duke it out every day in some pretense of price discovery set by those who literally print money.

As of Friday the comex gold "coverage" or amount of paper claims on every ounce of physical, was literally off the chart, soaring to a mindblowing 207 ounces of paper gold claims for every ounce of deliverable gold. This also means that the dilution ratio between physical gold and paper gold has hit a new all-time low of just 0.48%!