Despite yesterday's lackluster earnings the most recent market levitation on low volume was largely due to what some considered a moderation in geopolitical tensions after Europe once again showed it is completely incapable of stopping Putin from dominating Europe with his energy trump card, and is so conflicted it is even unable to impose sanctions (despite the US prodding first France with BNP and now Germany with the latest DB revelations to get their act together), as well as it being, well, Tuesday, today's moderate run-up in equity futures can likely be best attributed to momentum algos, which are also rushing to recalibrate and follow the overnight surge in the AUDJPY while ignoring any drifting USDJPY signals.
Following the overnight ramp in various JPY crosses (dragging equity futures higher, and the Nikkei up 0.8%) it is as if the market is desperate to put all of last week's geopolitical events in the rearview mirror, and while yesterday there were no economic events of note, today's CPI and existing home prints should provide at least some distraction from the relentless barrage of one-line updates on Ukraine and Gaza. Still, that is precisely where the biggest risk remains, with an emphasis on the possibility of more Russian sanctions, this time by Europe.
This week, 70 years after Bretton Woods, leaders from China, Russia, India, Brazil, South Africa, and several other nations are hard at work in Fortaleza, Brazil creating a new development bank that will compete against the US-controlled World Bank. This is a major step in an obvious trend towards a new financial system. Every shred of objective data is screaming for this to happen. It’s a different world. Everyone realizes it except for the US government, which is still living in the past where they’re #1 and get to call all the shots.
McDonalds will have a tough time explaining is why after almost hitting 'escape velocity' and nearly posting positive annual comps in the US, McDonalds just reported that May US comps once again dipped, declining by 1.0%, on expectations of a tiny 0.1% increase, thus cementing the longest period in our records database, a total of 7 months, in which McDonalds has gone without posting a single month of increasing US sales! We can't wait for the company to blame the blamy balmy, spring weather as the reason why nobody could afford a 99 cent meal.
Has the next major economic downturn already started? The way that you would answer that question would probably depend on where you live. If you live in New York City, or the suburbs of Washington D.C., or you work for one of the big tech firms in the San Francisco area, you would probably respond to such a question by saying of course not. In those areas, the economy is doing great and prices for high end homes are still booming. But in most of the rest of the nation, evidence continues to mount that the next recession has already begun for the poor and the middle class.
If there is one thing that the militarized warzone with the weapons ban (and which makes east Ukraine look like a kindergarten) namely Chicago, did not need in order to fall further into social chaos and disarray, it is a new tidal wave of unemployment: people freshly without jobs who for lack of better options would likely join the daily survival of the fittest routine on the streets of the windy city. And a tidal wave of unemployment is precisely what Chicago is likely to get if, as a group of Chicago aldermen have proposed, the minimum wage in the nation's third-largest city is nearly doubled to $15 an hour. Why $15? Because according to recently striking McDonalds line cooks, it's only fair, and is the minimum pay that fast-food workers have sought during national protests.
The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since we always look for a silver lining in a black cloud, we predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.
Another company which relies on the viability of the global consumer for its profits reports, and sure enough another company that misses: namely McDonalds. Moments ago the fast-food giant reported Q1 revenues of $6.70 billion, missing expectations of $6.72 billion (pushing the number of companies that have missed revenue estimates this earnings season once again into the majority), and also missing EPS estimates of $1.24, printing at $1.21, which however will not be a surprise to those who have been following our reporting on MCD's same store sales growth, or lack thereof, in the US. But while the collapse of the US consumer is well-known, and will hardly be an embarrassment for McDonalds management to reveal its exposure to it, what does the CEO blame the miss on? Why the weather of course.
A few weeks ago, when the US announced the first set of sanctions against Russia, we jokingly commented that among the possible retaliations would be a Russian explusion of that global US permastaple, McDonalds. As it turns out, yet another "joke" may be on its way to becoming the truth.
As the cost of living increases around the globe, wage protests and strikes have become commonplace, particularly in the emerging market space:
The situation with Russia should give investors and traders a reason to brush up on their history, as current events take root in things that happened 50, 100, and 200 years ago. To understand this, can provide perspective, during an information war, where it's not easy for some to separate facts from beliefs and propoganda (on both sides). The relationship between US and Russia has always been interesting, as we shall explore.
The cultural divide
So much for de-escalating:
RUSSIAN PRESIDENT VLADIMIR PUTIN SIGNS ORDER ON RECOGNITION OF CRIMEA AS SOVEREIGN STATE - RIA
Surely to precede Putin's own executive order recognizing Crimea as the latest member of the Russian Federation. And as for those "crippling" sanctions, via the FT, here is the locals reall think and why the Russian stock market is soaring as we reported earlier.
Moments ago McDonalds reported its latest monthly comp store sales numbers. Printing at -1.4% for the US, this was a nearly double miss to expectations of a 0.6% decline, and was the 4th consecutive monthly drop in annual sales - the longest such stretch in the past decade and likely longer. Looking at this data, there are two observations: i) Americans, courtesy of record obesity rates, are finally getting serious about their health, and have shunned the infamous 99 cent deep fried meals or ii) courtesy of the Fed's "Fed's recovery", the average American can no longer even afford sub-$1 deep fast food.
If our inner self, our essence, is not centered and at peace, at best we will be ineffective and at worst just a miserable person.
It may not be as sleek and intimidating as Robocop (or Skynet's Terminator) but California-based Knightscope's recently unveiled line of K5 robots will “predict and prevent crime with an innovative combination of hardware, software and social engagement.” While everyone from Jamba Juice to McDonalds is looking at robotizing their workforce away from minimum-wage-hike-demanding, bathroom-break-needing, healthcare-expecting, sleep-requiring humans, it seems everyone from your local mall cop to replacing police in neighborhood watch is now under threat as the automation of the American workforce moves from science fiction to science fact.