Green Shoots

Merkel Facing Humiliation, Political Defeat In Her Home State On Sunday

Chancellor Angela Merkel's conservative Christian Democrats, hit by a series of regional election defeats this year, face further losses in a vote in the northeastern state of Mecklenburg-Western Pomerania - the home state of Angela Merkel - on Sunday where if the latest polls are right, Merkel is set to suffer a humiliating defeat.

Musical Chairs

Economics is a bit like musical chairs. In a recession, the economy takes a hit and there are some casualties. Some players fail to get a chair in time and are out of the game. The game then goes on without them. The economy eventually recovers. But a depression is a different game entirely...

Housing Bubble 1.0 Vs. Housing Bubble 2.0 - The Culprit Is "Shadow Demand"... Again!

"If 2006 was a known bubble with housing prices at “X”, affordability never better, easy availability of credit, unemployment in the 4%’s, total workforce at record highs, and growing wages, then what do you call today with house prices at X+ 5% to 20%, worse affordability and credit, higher unemployment, weakening total workforce, and shrinking wages? Whatever you call it, it’s a greater thing than “X”."

The True State Of The US Consumer: All Six Retail Companies Reporting April Comp Sales Missed

If one looks at the state of retail companies reporting same-store sales today, a troubling picture emerges about both the US economy and the US consumer emerges. As Bloomberg notes, each of six companies, among which L Brands, Zumiez, The Buckle, Costco, The Cato Corporation and Fred's - that reported April comparable sales missed estimates compiled by Retail Metrics.

CEOs Are Hopeful But "Looking For A Macro Curveball"

It's not just Halliburton ("What we are experiencing today is far beyond headwinds; it is unsustainable") and Intel (12,000 layoffs amid re-evaluation of programs) that are facing up to a new normal very different from expectations. As Avondale Asset Management notes, having poured over 100s of earnings transcripts, while most CEOs don’t see signs of an imminent downturn, the environment still feels a little fragile. It seems that almost everyone is on high alert for a macro curve-ball...

Cycles, Bounces, & The Only Question That Matters

Unfortunately, when central-planners "drag forward" future consumption today, you leave a "void" in the future that must be filled. That future "void" continues to expand each time activity is dragged forward until, inevitably, it can not be filled. This is currently being witnessed in the overall data trends as seen in the deterioration in corporate earnings and revenues. The only question is whether Central Banks can continue to support asset prices long enough for the economic cycle to catch up. Historically, such is a feat that has never been accomplished.

Futures Fade As Chinese "Good News Is Bad News" For Fed, Oil Drops As Doha Concerns Emerge

Good news is still bad news after all. After last night's China 6.7% GDP print which while the lowest since Q1 2009, was in line with expectations, coupled with beats in IP, Fixed Asset Investment and Retail Sales (on the back of $1 trillion in total financing in Q1)  the sentiment this morning is that China has turned the corner (if only for the time being). And that's the problem, because while China was a good excuse for the Fed to interrupt its rate hike cycle as the biggest "global" threat, that is no longer the case if China has indeed resumed growing. As such Yellen no longer has a ready excuse to delay. This is precisely why futures are lower as of this moment, because suddenly the "scapegoat" narrative has evaporated.

Only 4% From Record Highs?

“There have been three great inventions since the beginning of time: fire, the wheel, and Central Banking. – Will Rogers

First There Was "Brown's Bottom," Now Gold Gains On "Morneau's Miscue"

Gordon Brown, back when he was the UK Chancellor of the Exchequer, distinguished himself by selling off approximately one-half of Great Britain’s gold reserves at what turned out to be a near-bottom at the end of the secular bear market in gold which lasted from 1980 to 2000-ish. However, the news that the new Canadian Finance Minister Bill Morneau has completed selling all remaining Government of Canada gold reserves may remove Brown's laughing-stock status.

"The Commodity Rally Is Not Sustainable" - Goldman Is Now Waiting For The Next Big Drop

As noted yesterday morning, "Goldman does it again" when just hours after Goldman said the "bearish cash for iron ore was intact," the commodity recorded its biggest surge in history crushing anyone short, and soaring 20% across the globe. That however has not dented Goldman's conviction that the commodity rally is overdone (we actually agree with Goldman for once) and just hours ago the head of commodities at Goldman Jeffrey Currie doubled down on Goldman's bearish commodities call saying  "market views on reflation, realignment and re-levering have driven a premature surge in commodity prices that we believe is not sustainable.

Goldman Tells Clients To Short Gold 5 Days After Saying Gold May Soar "Much Higher Over Time"

"Bottom line, although 1,200-1,202 might hold in the near-term, there’s scope to extend much higher over time." - Goldman Sachs, Feb 10, 2016

"As we maintain our view of rising US rates and hence lower gold prices with a 3-month target of $1100/toz and 12-month target of $1000/toz, we are recommending shorting gold through a GSCI-style rolling index" - Goldman Sachs, Feb 15, 2016

What Hath The Fed Wrought?

We have transitioned from free markets to centrally-planned and financially-engineered markets as the PhDs attempt to control the greatest monetary experiment ever undertaken. But they are almost out of runway... and they know it as mainstream market participants belief in their omniscience is rapidly fading.