Housing Market

With homebuilder sentiment slipping,blamed on the weather (despite improvement in the Northeast), Architecture billings down, and lumber prices down, it should not be totally surprising that existing home sales collapsed in January (-4.9% against expectations of -1.8% to a worse than expected 4.82 million SAAR). This is the lowest existing home sales since April. Oh - and before the talking heads blame the weather - the biggest drop in home sales was in The West (with its warm, dry, sunny home-buying climate). Considering that existing home sales most recent peak in 2014 failed to take out the previous government-sponsored peak in 2013 and remains 30% or more below the 2005 peak, and claims that the housing recovery is in tact are greatly exaggerated.

Last week it was 19 central banks (including the ECB which accounts for 19 nations) which had cut rates in 2015, mostly in "surprise", unexpected easing decisions. Moments ago the number became 20 when the Israel central bank just cut its interest rate by 0.15% to 0.1%, the lowest on record, a move which once again caught the market by surprise as only 3 of 23 analysts had predicted it.

Greece moves off front burner. Markets can turn attention to 1) strength of deflationary forces, 2) state of cyclical recoveries, and 3) outlook for Fed policy.

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.

There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that "Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout." But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.

• Markets From Stocks to Debt to Euro Show Little No Panic (BBG)
• Greek Euro Exit Risk Increases as EU Delivers Ultimatum (BBG)
• Oil rises to $62, near 2015 high as Mideast risks support (Reuters)
• Texas judge blocks Obama plan to protect undocumented immigrants (Reuters)
• Oil Train Derails and Ignites Forcing West Virginia Evacuations (BBG)
• Battle rages for town where Ukraine rebels reject ceasefire (BBG)
• Chinese Firms Tiptoe Back Into Europe’s Battered Financial Sector (WSJ)
• Putin’s Paradise Becomes Economic No-Go Zone Where Cash Is King (BBG)
• Emerging fund managers stuck in buy-and-hold as trading shrivels (Reuters)

There was a brief period this morning when market prices were almost determined by non-central banks. Almost. Because shortly before the European market open, a technical failure on the Eurex exchange prevented trading in euro-area bond futures the day after Greek debt talks collapsed. And sure enough, after initially seeing significant downward pressure, which nobody could capitalize on of course courtesy of the broken Eurex, risk both in Europe and the US has since rebounded courtesy of the ECB, SNB and BIS, led by the EURUSD (because a Grexit threat which according to Commerzbank has been raised from 25% to 50% is bullish for the artificial currency), which is now at the level last seen just before yesterday's negotiations broke down, and US futures are about to go green.

It has been a quiet start to the week, with US equity futures and European stocks mostly unchanged with all eyes on what progress (if any) will be made between Greece and the Eurogroup, where the press conference is scheduled for 7:00 pm GMT (expect significant delays) in what is otherwise expected to be a relatively subdued day with the US away from market and a light macroeconomic calendar.

• Greece will do 'whatever it can' to reach deal with EU (Reuters)
• ECB Urges Greek Political Deal as Emergency Cash Is Tight (BBG)
• Fighting rages in run-up to Ukraine ceasefire (Reuters)
• Eurozone GDP Picks Up, Thanks to Germany (WSJ)
• Two J. P. Morgan Executives Connected to Asia Hiring Probe Pushed Out (WSJ)
• Putin's High Tolerance for Pain and Europe's Reluctance to Inflict It (BBG)
• Indigestion Hits Top U.S. Food Firms (WSJ)
• Alibaba's Jack Ma seeks to reassure employees over U.S. lawsuits (Reuters)

The bond market may have gotten so fragmented in recent months that even Bloomberg was amazed at how little trading volume it necessary to make a price impact, the amount of bond traders (and certainly salesmen), and certainly their bonuses, appeared to only go up. "Appeared" being the key word, however, because as Bloomberg reports, "the average number of dealers providing prices for European corporate bonds dropped to a low of 3.2 per trade last month, down from 8.8 in 2009, according to data compiled by Morgan Stanley."

• 'Glimmer of hope' for Ukraine after deal at Minsk peace summit (Reuters)
• Ruble Rebounds, Russian Stocks Surge on Ukraine Cease-Fire Deal (BBG)
• Greek PM Tsipras in Brussels as clock ticks on EU bailout (Reuters)
• Emerging-Market Currencies Rout Not Over for Traders (BBG)
• Little noticed, new Saudi king shapes contours of power (Reuters)
• In Wake of Financial Crisis, Goldman Goes It Alone (WSJ)
• AmEx Is Losing Its Millionaires (BBG)
• Thousands to Lose Health Insurance Over Residency Questions (WSJ)

There have been ZERO times that the Federal Reserve has entered into a rate hiking campaign that did not have a negative consequence...

China’s stock market is on fire but its economy is cooling off.  Can the divergence last? And what’s next for China? Stay tuned to find out.

The world economy stands on the brink of a second credit crisis as the vital transmission systems for lending between banks begin to seize up and the debt markets fall over. The latest round of quantitative easing from the European Central Bank will buy some time but it looks like too little too late.