Deja vu all over again... and investors remain ever full of faith...
The 40%-plus drop in oil prices over the past 6 months has garnered a lot of attention recently, most of it focused on the economic stimulus lower oil prices should provide the global economy, the impact on currency and fixed-income markets, and the increase in economic pain suffered by exporters such as Iran and Russia. However, based on historical data, the potential increase in geopolitical tail risk that lower oil prices may represent is an overlooked consequence that, while low probability, would have an outsize impact on the global economy.
With all eyes firmly distracted in Cuba (or Sony or Russia or Ukraine), we thought a brief reminder worthwhile...
Think young adults in Mexico, Thailand, Philippines, and Russia have it tough? Think again. 20-24 year-olds in the USA have an average gross income over 40% below the national average. That is the worst disparity in the world... USA USA USA!!
"Abenomics is not having clear traction across the country," warned the head of Japan's auto lobby on Thursday as unexpectedly weak domestic sales revealed - yet again - what an utter disaster government policy is. "We feel a sense of crisis about the fact that cars are actually not selling," he exclaimed, saying that, as Reuters reports April sales tax hike was only partly to blame for the domestic sales weakness, citing the government's failure to boost consumption. But, but, but Japanese stocks are up 1000 points in the last 2 days so how can this be?
"It appears possible that the Central Bank of Russia has started to sell off some of its gold reserves in December, with some sources reporting that official gold reserves dropped by $4.3 billion in the first week of the month."
Shale 0 - Saudi Arabia 1
Shifting consumption from gasoline sales to retail sales does not create economic growth. It is just a "shift" in where the same dollars are spent. However, there has been much "hoopla" over the recent retail sales report for November that saw retail sales jump for the month by 0.7%. While on the surface this appears to be a strong retail sales report, a quick look below the surface quickly destroys that claim.
We are far too speechless to even comment on the latest Goldman "leading indicator" swirlogram, which we can only assume was made public after another unprecedented "North Korean hack" at US "recovery" propaganda central, so here is Goldman's own take:
As we explained previously, quietly hidden within the humanitarian-sounding "The Ukraine Freedom Support Act of 2014", under the premise of enabling further sanctions on Russia, is the provision of "lethal aid" to Ukraine. Today, President Obama signed it into law...
*OBAMA SIGNED RUSSIAN SANCTIONS BILL TODAY, but SAYS HE DOESN'T PLAN TO IMPOSE SANCTIONS UNDER NEW LAW
Because he knows full well that is not the important part. The "lethal-aid" aspect is a direct provocation to Russia.. and he knows exactly how Putin will respond.
Is The Oil Implosion Supply Or Demand Driven? Here Is The Very Simple Answer, Thanks To Saudi ArabiaSubmitted by Tyler Durden on 12/18/2014 - 14:41
There has been much debate whether the crude price implosion has been due to excess supply or not enough demand. Here, courtesy of the oil minister at the world's largest crude supplier, is the answer:
- NAIMI SAYS DEMAND FOR OIL SLOWED MORE THAN EXPECTED: SPA
- NAIMI SAYS GLOBAL ECONOMY SLOWDOWN LARGELY BEHIND MKT PROBLEM
Which, of course, to anyone with even the most rudiemntary logic and charting skills, should not come as any surprise.
Through the overly-complex verbiage riddled with a copious number of contingencies, a simple message was actually able to surface. The net result is modestly hawkish and one consistent with our "Sooner but Slower" rate cycle perspective. Markets are being driven more by fear of missing the upside, and fear of under-performing peers and benchmarks, than by any other factor. This Pavlovian response has worked well in recent years and encouraged by the Fed. However, this pattern is in the 9th inning. Moreover, such herd-like behavior will run into great difficult due to dreadful market liquidity that is the result of regulatory over-reach; indications that were evident in markets over the past few weeks.