David Rosenberg, formerly of Merrill Lynch and currently of Gluskin Sheff, who famously flip-flopped from being a self-described permabear to uber-bull last summer for the one reason that has yet to manifest itself in any way, shape or form, namely declaring that wage inflation as imminent (it wasn't, but perhaps Mr. Rosenberg was merely forecasting the trajectory of his own wages) and generally an end to deflation, has a rhetorical question for his paying clients, as asked in his letter to investors from January 2. To wit: "THIS IS WHAT PASSES FOR ANALYSIS?" We too follow up with an identical question not only for Mr. Rosenberg's clients, but for our own readers.
While existing home sales rose 0.8% (beating the 0.5% expectation) MoM in November, once again previous data was revised lower. On an unadjusted basis however, YoY home sales rose at only 1.7% - missing expectations of 2.6% growth. The Midwest region saw existing home sales drop again - for the 6th month in a row, down over 5% in that period.
Having missed expectations by the most since June 2010 in November, The Conference Board's measure of Consumer Confidence missed once again. The previous dip was revised higher (because 'revisions' is exactly what makes sense in a confidence survey) from 88.7 to 91.0 but the current level printed 92.6 against expectations of 93.9. This is the 3rd miss of the last 4 months (as stocks hit record highs and gas prices collapse?). Employment "not so plentiful" rose to its worst level in a year, employment expectations going forward dropped as did income growth expectations.
- U.S. agency gives quiet nod to light oil exports (Reuters)
- China’s Stocks Fall to Pare Biggest Monthly Advance Since 2007 (BBG)
- The Cartel: How BP Used a Secret Chat Room for Insider Tips (BBG)
- BRICs Busted as Stocks Diverge Most on Record on Outlook (BBG)
- Petrobras deadline prompts some bondholders to push for default (Reuters)
- AirAsia Captain at His Happiest When Flying, Family Says (BBG)
- UK housing crisis: brick stocks hit record low (Telegraph)
As Politico's Michael Grunwald writes below (we believe non-satirically), the midterm election’s discontent was illegitimate. The point is that Americans should cheer up! And whose fault is all the collective doom? Well, Bill De Blasio already explained that, as Grunwald confirms, the press has a problem reporting good news. So sit back, grab a drink (though swallow it first) and enjoy reading why "everything is awesome" in America (apart from a record 101.5 million Americans not working, record numbers on foodstamps, record numbers on disability, a record wealth divide, a record - and deadly - racial divide, record poverty, and record child homelessness).
We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.
Confused how the US economy just "grew" by 5%? The following analysis explains it all...
ConvergEx's Nick Colas quarterly review of “Off the grid” economic indicators tells a story somewhat less sanguine than the typical government data. Confidence is returning, yes. But consider just how low it got: the top 3 Google autofills for “I want to sell my …” featured “kidney” for the first 3 quarters of this year. It was replaced in the current quarter with “Laptop”. Progress, of a sort...
Despite the collapse of inflation expectations in last month's UMich confidence, the push to 7-year highs was unstoppable (though missing expectations)...after soaring confidence amid Ebola scares and crashing stocks in October, even the surveyers were questioning the respondents' replies "it would be surprising if recent declines in household wealth did not reverse some of the recent gains in optimism in the months ahead." But sure enough, to maintain the magic, UMich consumer confidence rose from November's missed expectations to the highest since Jan 2007 at 93.6. Inflastion expectations for the next year fell from the preliminary to the lowest in over 4 years.
While the cancellation of 'The Interview' wiped billions off the US Box Office take in 2014 (</sarc>), ticket sales in North America will total roughly $10.5 billion, according to The NY Times, the lowest since 2000 (after inflation). Regal Cinemas and AMX Theatres have seen profits collapse and Carmike Cinemas has plunged to a loss as major movie delays (from Pixar and Universal), "pirating" of several movies (The Expendables 3 and Annie) before their release, and studios suffering one dud after another (Warner Bros.) the 4% YoY decline - for what is ultimately an affordable luxury - suggests the gas-price-savings are going anywhere but discretionary spending (just as we noted previously).
There are two key events driving overnight risk prices: first, there is the Bloomberg story that "China Offers Russia Help With Currency Swap Suggestion", which was previously covered extensively here a week ago, but now that the algos have official confirmaiton they have sent the Ruble shorts into a panic short squeeze, with the USDRUB tumbling another 5% as of latest. The other key development pushing oil prices modestly higher again, is yesterday's speech by Saudi oil minister Ali al-Naimi who "expressed confidence prices will pick up", however not due to a drop in supply - because he made it very clear OPEC will never cut output and instead will wait for the high cost producers to exit the game - but amid improved economic growth.
Yesterday's epic market surge, the biggest Dow surge since December 2011 on the back of the most violent short squeeze in three years, highlighted just why being caught wrong side in an illiquid market can be terminal to one's asset management career (especially if on margin), and thus why hedge funds are so leery of dipping more than their toe in especially on the short side, resulting in a 6th consecutive year of underperformance relative to the confidence-boosting policy tool that is the S&P. And with today's session the last Friday before Christmas week, compounded by a quadruple witching option expiration, expect even less liquidity and even more violent moves as a few E-mini oddlots take out the entire stack on either the bid or ask side. Keep an eye on the USDJPY which, now that equities have decided to ignore both HY and energy prices, is the only driver for risk left: this means the usual pre-US open upward momentum ignition rigging will be rife to set a positive tone ahead of today's session.
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:
Since the beginning of this year, Wall Street economists and analysts have been consistently prognosticating that following the Federal Reserve's latest bond buying campaign, economic growth would gather steam and interest rates would begin to rise. This has consistently been the wrong call. The recent decline in interest rates should really not be a surprise as there is little evidence that current rates of economic growth are set to increase markedly anytime soon. Consumers are still heavily levered; wage growth remains anemic, and business owners are still operating on an "as needed basis." This "economic reality" continues to constrain the ability of the economy to grow organically at strong enough rates to sustain higher interest rates. This is a point that seems to be lost on most economists who forget that the Federal Reserve has been pumping in trillions of dollars of liquidity into the economy to pull forward future consumption.