Last month we observed that in the aftermath of the worst print in non-revolving (i.e., student and auto loans) debt since November 2013, that the subprime-credit driven, pardon the pun, feeding frenzy for cars is now over. And sure enough, following this month's disappointing auto sales which missed virtually for every single producer, we were again correct. This month, however, things are even worse, because while last month it was the collapse in the non-revolving debt that was the highlight, at least it was modestly offset by a surge in revolving credit as consumer loaded up the credit cards. No such luck this month.
- 5 Things to Watch in February’s Jobs Report (WSJ)
- Draghi Declares Victory for Bond-Buying Before It Starts (BBG)
- Apple Pay Sign-Ups Get Tougher as Banks Respond to Fraud (WSJ)
- As World’s Hottest Economy Unravels, Nigerians Feel the Squeeze (BBG)
- EU discontent over French budget deal's 'political bazaar' (Reuters)
- Foreign Takeovers See U.S. Losing Tax Revenue (WSJ)
- Goldman Shareholders’ Hope for Bigger Payout Dashed by Fed (BBG)
- Europe Stocks Headed for 31% Surge This Year Amid QE, Citi Says (BBG)
- Dollar revs up for jobs data, euro bonds rally on ECB (Reuters)
The question stands: how much longer will the Fed allow the ECB to export its recession to the US on the back of the soaring dollar, and how much longer will the market be deluded that "decoupling" is still possible despite a dramatic bout of weakness in recent US data. Look for the answer in today's BLS report, which - if the Fed is getting secound thoughts about its rate hike strategy in just 3 months - has to print well below 200,000 to send a very important message to the market about just how much weaker the US economy is than generally perceived. For now, however, the ECB is getting its way, and the question of just how much European QE is priced in, remains open, with peripheral bond yields dropping to new all time lows for yet another day, while the EURUSD has plunged to fresh 11 year lows, sliding below 1.094, and making every US corporation with European operations scream in terror. Looking at markets, US equities are just barely in the red, coiled to move either way when the seasonally-adjusted jobs data hits.
The 2008 worldwide financial crisis was produced due to excessively easy monetary policy, which caused the largest debt driven mal-investment in housing, automobiles, and Chinese produced crap in world history. The consequences of this debt bacchanalia should have been the orderly liquidation of the Wall Street entities that created the crisis, the writing off of trillions in bad debt, corporate and personal bankruptcies of businesses and people who borrowed recklessly, a sharp steep economic decline to cleanse the excesses, and politicians who immediately began the process of reducing budgets and addressing long term unfunded unpayable liability promises. Instead, the psychotic oligarchs did not want to lose any of their power, wealth or control over the proletariat. They have done the exact opposite of what needed to be done.
With key economic data either behind us (with the downward revised GDP), or ahead of us (the February payrolls on deck), and the Greek situation currently shelved if only for a few days/weeks until the IMF payment comes due and the farce begins anew, stocks are focuing on the widely telegraphed 25 bps Chinese rate cut over the weekend, which however has so far failed to inspire a broad based rally either in Asia (where the SHCOMP closed up 0.8% after first dipping in the red) or across developed markets. In fact, as of this moment futures are hugging the unchanged line as the USDJPY attempted another breakout of 120.000 but with numerous option barrier expiration stop at that level, it has since retracted all the overnight gains and is back to the Sundey lows, even as the EURUSD has seen a powerful breakout from overnight lows and is currently at the highest level since the US GDP print, following the release of the final European February PMI data, as a result of USD weakness since the European open.
"...we are failing to deliver on our obligations as Americans, that is undeniable. We are allowing the political class to plunder our wealth, negate our freedoms and desecrate our Constitution. Sadly we have become the immoral populace our founding fathers warned all future generations not to become... The duty and obligation is ours and so too then are the failures and successes of our society. We are 15 years in to what is absolute denial regarding the competence of our nation’s policymakers. Yet here we sit, silent and indifferent to our own demise; so completely antithetical to the character of a true American."
"... should interest rates rise later this year, some households and corporations may find themselves overleveraged as interest rates and borrowing costs rise. When looking at interest rate sensitivity by loan product, we see that auto loans rates are the most sensitive to changes in the fed funds target rate. In addition, we can see that for each one-percentage point rise in the fed funds rate, the interest rate on a 48-month new car loan rises 0.61 percentage points."
The overwhelming mainstream media message continues to be everything is strong and the future is absolutely as bright as ever, as measured by the all time high markets; but the facts and the data clearly tell a different story. While memories are short, 2008/9 (and 199/2000) taught us that pundits will always tout the ‘everything is great’ story until it is too late. They laugh and ostracize anyone who attempts to rock the boat with a message of reality. And they do it to deter others from delivering such a message. That message is that there exists no catalyst mechanism to pull us out of this economic slumber. So you can listen to and laugh along with the ‘all knowing’ pundits or you can take heed of history and protect yourself now. But do remember the choice was yours. You will have nobody to blame but yourself when and if it all comes tumbling down and you were too busy laughing.
Since the Great Financial Crisis, the only two categories that have seen a net increase in debt are Student and Auto Loans.
The dominoes are beginning to fall. The initial spark in 2008 has triggered a series of unyielding responses by those in power, but further emergencies and unintended consequences juxtapose, connect and accelerate a chain reaction that will become uncontainable once a tipping point is reached. The fabric of society is tearing at points of extreme vulnerability, with depression, violence and war on the foreseeable horizon. Mr. President, the shadow of crisis has not passed. The looming shadow of crisis grows ever larger and darker by the day as this Crisis enters the most dangerous phase, where the existing social order will be swept away in a torrent of carnage and ferocious struggle. We are not a chosen people. We are not immune from dire outcomes.
Consumer Credit Growth Misses: Revolving Credit Surges As Student, Car Loans Have Weakest Increase Since February 2012Submitted by Tyler Durden on 02/06/2015 15:13 -0500
Following a significant downward revision to November's data, December consumer credit growth printed a gain of $14.755 billion, missing expectations of $15 billion (for the 5th month) and hovering near one-year lows. The most notable aspect was the $5.77 billion surge in revolving credit (e.g. credit cards) as Americans extended and pretended into the holidays - the biggest rise since April.
- RadioShack files for bankruptcy; Sprint to take over some stores (Reuters)
- Kansas To Issue Bonds and Invest Proceeds to Boost Pension Returns (WSJ)
- Merkel to Make Last Push With Putin as Pessimism Prevails (BBG)
- Islamic State in Syria seen under strain but far from collapse (Reuters)
- Texas Swagger Fades Fast as Oil Town Squeezed Hard by OPEC (BBG)
- SEC probes Blackberry options trading ahead of Reuters report about Samsung talks (Reuters)
- Spanish Bonds Underperform Italy’s as Podemos Gains Popularity (BBG)
- Steelworkers Union Rejects Offer From Refiners (WSJ)
- Brazil January Inflation at Fastest Pace in Nearly 12 Years (BBG)
It has been a quiet overnight session, following yesterday's epic short-squeeze driven - the biggest since 2011 - breakout in the S&P500 back to green for the year, with European trading particularly subdued as the final session of the week awaits US nonfarm payroll data, expected at 230K, Goldman cutting its estimate from 250K to 210K three days ago, and with January NFPs having a particular tendency to disappoint Wall Street estimates on 9 of the past 10. Furthermore, none of those prior 10 occasions had a massive oil-patch CapEx crunch and mass termination event: something which even the BLS will have to notice eventually. But more than the NFP number of the meaningless unemployment rate (as some 93 million Americans languish outside of the labor force), everyone will be watching the average hourly earnings, which last month tumbled -0.2% and are expected to rebound 0.3% in January.
The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today's highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.
UPDATE: Full SOTU Speech released - "THE SHADOW OF CRISIS HAS PASSED"
By now it is well known that The State of The Union tonight will be about President Obama's Robin-Hood Agenda. Furthermore, it is entirely clear that his proposals have no chance of becoming law. As WaPo's Marc Thiessen notes, Obama is not delusional, his move is completely and transparently political... And just as Eric Cantor suggests will merely serve to inflame the GOP. From taxes to cyber security and from community college to housing... in 50-65 minutes, all will be clear...