The Case Shiller for July, that's right July (does anyone remember that? that's was before the US was about to go bankrupt due to that whole flap in Congress over the debt ceiling, nevermind the second European bankruptcy), is out and it was both better and worse than expected: the Y/Y print beat at -4.1% on expectations of -4.4%, up from a revised -4.4%, yet missing on a sequential basis, which was expected to come at 0.1%, instead printing at 0.05%, unchanged from the June's upward revised M/M 0.04%. In other words, this is not only traditionally late data, it also confirms that the double dip continued into the months that saw the market tumble by nearly 15%. Look for substantial drops in the August and September Case Shiller data.
So what are those lines on charts telling us?
Roubini and Soros talked the same double dip recession doom regarding the U.S. and the rest of the world.
The infographic serves as a scary reminder that America is at a treacherous debt crossroad, and most signs seem to suggest that things could get even more difficult from here on out.
Our hats off to JP Morgan for a creative depiction of the current European debt crisis, although we typically take a dim view of any investment vehicle that's associated with the word "leveraged" as recommended by JPM.
This will end badly. All manipulation ends the same way.
Evidence suggests that the conomy has already been in recession, mainstream conomist pundits continue to argue about whether the conomy will have a double dip or not. While they are trying to figure it out, the damage to the financial markets is fait accompli, and will get worse.
Hot labor market trend even in a recessionary environment and jobs to avoid at all costs.
Little surprise to the payroll report on Wall Street, which is now united in its call that the only option is for the Fed to do more QEn+1
Even a broken clock could be right at least twice a day....
That the August Chicago PMI dropped to 56.6, down from 58.8 in Julye, and the lowest since November 2009 is irrelevant. What is relevant is that this number beat expectations of 53.3, so the ripfest is on: after all, stocks move higher on worse than expected data, which should they not surge on a consensus beat. Remember: the QE3/career risk rally is on. Nothing else matters. Among the index components, Prices paid dropped from 71.7 to 68.6, Production declined from 64.3 to 57.8, same for New Orders, Backlogs, and Inventtories. The two components that did go up were Supplied Deliveries from 55.9 to 60.5 and Employment, up from 51.5 to 52.1. And now everyone looks to tomorrow's ISM, for which the PMI is traditionally a good proxy, with hope that the number will print above 50 despite every single regional Fed indicating a mid-40's print.
Time for some more rotation of the titanic's deck chairs with the Princeton labor economist taking over Goolsbee. Unfortunately with Geithner still around, there is no risk America will change its current path heading straight into a Double Dip iceberg.
Over the past x months, one thing has become all too clear in FX land: the EURUSD must stay rangebound between 1.40 and 1.50, even though as Goldman's John Noyce presents in his latest "not-for-retail" packet, the fair value of the European currency continues to be higher than where it should be. Whether this is a simple case of the tail wagging the dog, whereby the ECB and China are terrified of the downstream effects should the European currency trade under the psychological barrier of 1.40, is unclear. What is clear is that every country in the world has skin in the game, and is forced to keep the EUR in Goldilock rangebound territory: not too low to spook European investors, and not too high to accelerate the German double dip. Some other risk assets correlations observed include the AUD vs 2 year swap spread basket, the VIX vs the S&P, and lastly, on the until recently massively overstretched CHF. Noyce tops it off with some technical perspectives on US govvies and the 2s10s, which is once again diving, although unclear if due to a bullish or bearish flattening.
Time to reestablish some compression trades. As the latest update from Capital Context indicates, ES, relative to its risk benchmark consisting of all other risk assets, is once again along in its optimism, trading about 15 points above its implied fair value. Paradoxically, the driver of today's bout of irrational exuberance is not the latest monetary stimulus announcement by the Fed, which obviously did not come, (and it may be time for the daily dose of sobriety: without fiscal and monetary stimulus Q3 and Q4 GDP will tumble; good luck buying stocks on contrarian bent when even the NBER admits we have entered a double dip), but merely "buying the news" - supposedly everyone was convinced there would be announcement by the Fed, which in itself was a catalyst to buy?! Regardless, the buying is only happening in stock as can be seen by the ES. As such it is time to put the trusty old compression trade back on: short ES, long the Contextual Risk leg.