"This is the big concern because we keep on thinking that lower energy prices are somehow good for the economy. That can't be, because energy prices or commodity prices in general don't drive economic growth. Economic growth drives commodity prices. So there are a lot of telltales out there that this drop in oil prices, this drop industrial metal prices, this is not good. It's a canary in the coal mine that something is not right in the global economy. And that is a concern for us all."
In conclusion: another month in which the Fed's trillions in reserves end up almost entirely in the stock market and NYC penthouses, with little trickling down into clothes and other "core" items, even as beef prices and asking rent hit record highs month after month.
... we have just one question.
This is how DB summarizes what has been the primary feature of capital markets this week - the huge move in European bond yields: "On April 17th, 10-year Bunds traded below 0.05% intra-day. Two and a half weeks later and yesterday saw bunds close around 1000% higher than those yield lows at 0.516% after rising +6.2bps on the day." Right out of the European open today, the government bond selloff accelerated with the 10Y Bund reaching as wide as 0.595% with the periphery following closely behind when at 9:30am CET sharp, just as the selloff seemed to be getting out of control, it reversed and out of nowhere and a furious buying wave pushed the Bund and most peripheral bonds unchanged or tighter on the day! Strange, to say the least. Also, illiquid.
A constant stream of hyprocrisy from Fed officials (will print moar money if stuff happens), The EIA (storage is getting fuller and fuller, but production will be lower than expected), and Saudi Oil Minister Naimi's idiocy (increased production, demanding non-OPEC cooperation, but optimistic on prices recovering in the short-term) has sent crude asymmetrically rocketing higher... which is now apparently a good thing for US equities.
"This is not investing," exclaims Ed Yardeni in this brief clip, "it is all about central bankers... these markets are all rigged." That is not a criticism he notes, "I just say that factually... I love these central bankers, they've been very good to the stock market." The clip is then followed by a defense of this pumping by central banks, because "we are a 401(k) society." Which apparently ignores the whole "massive inequality gap" issue that is staring America right in the eyes... But for now stocks are up so "shut up and enjoy it" as Larry Kudlow said yesterday.
If it was the Fed's intention to slow down the relentless surge in the dollar with yesterday's "impatient" removal which blamed the dollar strength on the "strength" in the US economy, it promptly failed after algos and a few carbon-based traders looked at the Atlanta Fed and realized that a 0.3% Q1 GDP print is anything but "strong." As a result the EURUSD, after soaring by nearly 400 pips yesterday in a market reminiscent of a third-world FX pair's liquidity especially following the previously noted USD flash crash, the dollar has recoupped nearly all losses, and the DXY is once again on the way up and eyeing the resistance area of 100.
Fed's Fisher: "[the stronger the dollar]... the better it is for our companies big and small to go out and hire American workers."
Goldman's Cohn: "the effects of the soaring dollar are just starting to be felt; for US exports, manufacturing, and jobs - it is not going to be positive."
In California, the low gas price "tax cut"for the consumer is officially over as gas prices soar by 60 cents to $3.23 per gallon in the last few weeks...
Citing "softening market conditions influenced by oil," US Steel has issued lay-off warnings to 756 workers in the US... Layoffs will begin in early March as both Ohio and Texas plants will be idled.
"Unequivocally" not good. Following last week's surge in initial jobless claims for 'Shale' states, Baker Hughes confirms rig counts continue to tumble. The last two weeks have seen the total US rig count fall the most since 2009 (and Canada down 9.3% this week alone). Seemingly confirming this weakness, The Kansas City Fed notes respondents see non-durable (petroleum) demand "sluggish", and rather awkwardly against the "everything's great meme," one respondent exclaims, "demand from oilfield customers is dropping rapidly." The current US rig count is now the lowest in 5 months.
US shale oil is now the marginal swing barrel in the new world oil order, and as Goldman Sachs warns (despite Larry Kudlow apparently knowing better), a decline in WTI to $75/bbl would start to significantly slow US shale growth (and thus employment, capex, and the entire US economy).
"So bye bye to my piece of the pie... I poured my paycheck into the Russell, Now my cash account's dry... It's just one month from a new all-time high, And now we're right back where we were in July..."
According to the latest Nielsen Media Research data, in the second quarter of 2014, CNBC viewership for all viewers just dropped to 162,000 - a new (and depressing for Comcast) low, on par with CNBC's viewership from Q2 of 1997! Where things get funny is when one looks at the ratings of that consummate entertainer, that self-appointed "voice of the people", Jim Cramer. Sadly for Cramer, the people are now gone. Because also according to Nielsen Jim Cramer's Mad Money show just had its lowest ever rated month in the 25-54 demo, and is about to have its second lowest rated month ever across total viewers.
While many Wall Street economists and strategists shrugged in the face of tin-foil-hat-wearing bloggers who suggested the disaster that is the part-time jobs receovery was due to The Affordable Care Act - of 953,000 jobs created In 2013, 77%, or 731,000 are part-time - epitomized best by Larry Kudlow and Deutsche Bank's ever-smiling Joe Lavorgna; it seems the drag on employers' hiring has now hit the mainstream media. As NBC Nightly News reports in this succinct clip, things are not going according to plan for the President's better bargain even as Fed's Bullard proclaims "clear improvement in labor markets." Perhaps he should watch TV this evening?