El Nino

It rose out of the tropical Pacific in late 1997, bearing more energy than a million Hiroshima bombs.

• Tsipras Hardens Greek Stance After Collapse of Talks (BBG)
• Obama Fights to Save Trade Bill (WSJ)
• German Stock Market Pain Seen Just Beginning Should Greece Exit (BBG)
• Russia to boost forces in western flank if U.S. stations arms in east Europe (Reuters)
• Lab Nears Settlement Over Pricey Medicare Drug Tests (WSJ)
• China's $358 Billion in Margin Loans Points to Next Bear Market (BBG)
• Draghi Faces EU Court Ruling on 2012 Bond Plan as Greece Teeters (BBG)
• Sex, lies and debt potentially exposed by U.S. data hack (Reuters)

"...the waters of the Pacific off the coast of California are a clear, shimmering blue today, so transparent it’s possible to see the sandy bottom below... clear water is a sign that the ocean is turning into a desert, and the chain reaction that causes that bitter clarity is perhaps most obvious on the beaches of the Golden State, where thousands of emaciated sea lion pups are stranded."

Tens of millions of people will be affected one way or the other.

Have we passed the tipping point for Brazil? We'll know in a few months.

• Christmas rally enters sixth day in Europe (Reuters)
• Downing North Korea's Internet not much of a scalp (Reuters)
• North Korean Internet Access Restored After Hours-Long Outage (BBG)
• At U.N. council, U.S. calls life in North Korea 'living nightmare' (Reuters)
• Ukraine Cuts Gold Reserve to Nine-Year Low as Russia Buys (BBG)
• De Blasio Seeks to Heal Rifts With Police After Officers Slain (BBG)
• Oil steady around $60 on hopes of strong U.S. data (Reuters) - so it fell below $60 because...
• Australian Dollar Hits Four and a Half Year Low on Chine Growth Worries (Reuters)

Just wehn you thought it was safe to shower again, NOAA issues their US seasonal drought outlook and crushes dreams of wetter winter helping Californians. Hopes for heavy rain from El Nino will not be enough to change the drought situation for 60% of Californians, as MotherJones reports, NOAA forecasters warn, "While we're predicting at least a 2 in 3 chance that winter precipitation will be near or above normal throughout the state, with such widespread, extreme deficits, recovery will be slow."

It appears Vladimir Putin is willing to hit'em while they're down. Early European equity weakness (and safe-haven flows) on asset-freeze threats have accelerated as Bloomberg reports, Russian energy minister Alexander Novak threatens gas supply disruptions if the EU continues to re-export Russian gas to Ukraine. 3Y German bond yields have plunged to -4.1bps, a record low close and European stocks are closing on their lows of the day.

Europe's leaders, we assume under pressure from Washington, appear to be making a big weather-related bet with their taxpayers' lives this winter.  As they unleash funding sanctions on Russia's big energy producers, Europe has pumped a record volume of natural gas into underground inventories in an effort to 'outlast' Russia and mitigate any Napoleonic "Winter War" scenario. The plan appears to be to starve Russian energy firms of cashflow - as flows to Europe are already plunging - and remove their funding ability, potentially forcing severe hardship on Russia's key economic drivers. There appears to be 3 potential problems with this plan...

"We had a relatively dry period during the Medieval Warm Period, 900-1400AD. There were several prolonged periods of drought that lasted decades to over a century during that time. That period was followed by a cooler, wetter period (the Little Ice Age) that continued until the 19 century. However, the tree-ring records suggest that the 20 century was unusually wet, meaning we had fewer droughts on average than the previous 1000 years....  the past decade in California and the West has been pretty dry, and the concern is that these climate conditions could continue for several more decades. We've seen these broader cycles of wet-dry in the past."

As of today, the forecast of fall/winter rain is in doubt.

just to make sure that the abysmal Q1 GDP which has now spilled over into Q2 and will likely see the US economy growing in the mid-2% range, has a sufficiently broad "excuse" in the third quarter of the year, here comes - in the middle of July - the polar vortex 2.0.  As WaPo reports, "However you choose to refer to the looming weather pattern, unseasonably chilly air is headed for parts of the northern and northeastern U.S at the height of summer early next week."

JPM's latest (and certainly not least) prophecy for the full year GDP: precisely one half of what it expected 6 months ago, or just 1.4%, following a cut to Q2 GDP to 2.5% from 3.0% (which means negative growth for the entire first half, something in a less insane world would be called a recession), while keeping Q3 and Q4 GDP miraculously at 3.0% for both quarters.

Just when you thought it was safe to leave your shelter and buy a car, buy a home, buy some Caterpillar trucks, and buy a Starbucks; NOAA reports the globe just experienced the hottest May on record... With El Nino looming, we can only imagine the excuses of 'extreme weather' that will rear its ugly head once again in Q2 earnings... though of course all this will be fixed in Q3?

As oil prices have risen on geopolitical concerns (that have been printed away by central banks in stocks), so gas prices at the pump in the US have risen to their highest for this time of year since 2008 (and that did not end well). We are not alone in our concern as Morgan Stanley's (and esx Fed) Vince Reinhart warns that a more extreme jump in oil prices would be enough to stall the recovery (lowering real GDP growth by 1.7 percentage points one year out; and perhaps more worryingly, raise CPI growth by about 3.6pp, lowering real consumer spending growth by a full two percentage points).