Archive - 2015 - Story

We see far too much complacency out there when it comes to interest rates, in the same manner that we’ve seen it concerning oil prices. We live in a new world, not a continuation of the old one. That old world died with Fed QE. Just check the price of oil. There have been tectonic shifts since over, let’s say, the holidays, and we wouldn’t wait for the ‘experts’ to catch up with live events. Being 7 weeks or two months late is a lot of time. And they will be late, again. It’s inherent in what they do. And what they represent.

A week ago, we were surprised to learn that one of the most prominent critics of HFT, Joseph Stiglitz, had been barred from an SEC Panel that will "advise regulators on issues facing U.S. equity markets."  Today, a day after the SEC busted DirectEdge for failing to "accurately describe the order types being used on the exchanges" namely the infamous Hide not Slide, even after said order had repeatedly made the front page of the WSJ, the SEC finally announced the full list of members of the "New Equity Market Structure Advisory Committee" which will focus on the structure and operations of the U.S. equities markets. Alas most of the committee members are, sadly, placeholding figureheads. Because there is only one person on the list whose participation matters, and whose presence is not at all surprising...

we re-did Krugman’s chart for advanced countries with independent monetary policies.  Lo and behold, Krugman’s spending-growth relationship collapses, as Sumner would have expected. This is not to say that austerity is good.  But it does undermine the empirical basis for Krugman’s claim that reducing government spending lowers growth, and that increasing government spending raises growth, at least in countries that can use monetary policy as well as fiscal policy.

This wasn't how it was supposed to be? Collapsing crude oil prices - according to the mainstream (Fed-spoonfed) narrative means lower costs for business and 'massive' tax cuts for consumers enabling disposable income to surge. But, American Airlines just announced a 3.4 percentage point plunge in its load factor (ability to fill its planes) in December and while Southwest saw traffic rise, its load factor also fell as passenger revenue per seat tumbled 4-5%. So no extra spending... and now United reports it is looking to outsource 2,000 jobs in a cost-cutting effort (which seems odd given the total collapse of the fuel cost overhead?). Oh well, just keep repeating - crashing oil prices are unambiguously good.

Over the past 30 days sell side analysts that cover the Energy sector have been busy cutting their earnings estimates to reflect plummeting crude prices. They’ve snipped an average 3% from their Q4 2014 numbers for the 10 largest cap names, and slashed 19% off their 2015 whole-year estimates. Common wisdom has it that these reductions should shift over to the both Consumer sectors – Staples and Discretionary – driving estimated there higher. That isn’t happening. Over the same 30 day period, the analysts that follow the largest names in these groups haven’t moved their estimates for either Q4 or 2015 by even 1%.

Tesla shares are down over 5% after-hours - and back below $200 - after CEO Elon Musk, speaking before addressing a conference in Detroit, said China Q4 sales declined significantly. As Dow Jones reports, Musk believes the sales decline is linked to consumer misperceptions regarding charging...

For all those who have forgotten that the I in the GDP equation stands for Investment, here is a reminder courtesy of the latest crude collapse victim, Suncor, which moments ago announced it is not only cutting its 2015 CapEx by $1 billion (as in I, directly and adversely impacting US GDP by the same amount) but that it would also cut "operating expenses" by up to $800 million, and, drumroll, implementing "a series of workforce initiatives that will reduce total workforce numbers in 2015 by approximately 1000 people, primarily through its contract workforce, in addition to reducing employee positions. There will also be an overall hiring freeze for roles that are not critical to operations and safety." Or as Joe LaVorgna and all the other mainstay CNBC "analysts" would call it, "unambiguously good."

With Bill Gross still in cross-asset limbo, it appears the undisputed fixed income crown, for now, goes to DoubleLine's Jeffrey Gundlach who recently opined, "something is not right." Shortly, the monarch of money markets will be discussing the economy, the markets and his outlook 2015, in his latest webcast titled, rather ominously, "V". Given Gundlach's concerns about the "health of the economy and financial system," we suspect the V-for-Vendetta climax anology may well be more what he had in mind... Full presentation below

Just two days ago we detailed the possibility that Russia could accelerate debt repayment on a $3 billion loan it granted to Ukraine that has broken its covenants. While there is no word yet from Russia on a decision whether to demand the payment, it appears, as Reuters reports, the US taxpayer - just as we warned - is quite willing to step up (thanks to their leaders in Washington) and guarantee $2 billion in loans to the world's 2nd most credit risky nation (after Venezuela).

Presented with no comment...

The U.S. Deep State is in favor of Saudi Arabia's strategy of forcing production cuts on its rivals and marginal producers for two profound reasons...

The Russian Ruble is re-crashing again today (higher by 3 handles and back above 66 RUB to the USD) as crude oil continues to plumb new depths. Having found some strength - via intervention amid 'stability' in crude prices in late December - the selloff since Christmas has been dramatic in both the Ruble and Crude. However, the contagious impact of this massive Ruble devaluation is, as Bloomberg reports, making life tougher for India's steelmakers. "In the past month or so, deals have been struck for steel imports from Russia," notes one steel industry executive, adding that such purchases "will only increase," as lower Russian prices "will be a threat to Indian steel mills."

Fort Hood officials and Hazmat crews are on site in Killeen after a US soldier, who recently returned from West Africa, was found dead outside his home. So far there are no answers as to why the soldier was not in quarantine and no known cause of death... (for now there are no indications the soldier had Ebola)

The touts have it backwards. This isn’t about greeters at Wal-Mart handing out tax cuts to hard-pressed American consumers. Its about the coming liquidation of the massive malinvestments and bloated economies that have been enabled by rampant central bank money printing and the resulting madcap expansion of unrepayable debt. Buying-the-dip was always a strategy that would work until it didn’t. The “oil tax cut” tale is designed to ensure that Wall Street’s Muppets will be the last to get the word.