New Normal

Consensus Forming: China Heading Back Into Financial Crisis

China’s historic post-2009 debt binge flew largely under the radar - fooling most observers into thinking the global economy was recovering rather than just re-leveraging. Now Beijing is back at it, borrowing over $1 trillion in this year’s first quarter, buying up commodities and creating the illusion of global growth. But this time the scam hasn’t gone unnoticed. Reporters, editors and money managers seem, at last, to be catching on. So think of today’s relative calm as the eye of yet another storm, and what’s coming as a return to the hyper-leveraged new normal.

10 Stats About The Last 10 Years

Think back over the last 10 years - how different was your life in April 2006?  While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:No iPhone;No Facebook (unless you were in college at the time); No Twitter; No Instagram; No Kim Kardashian; No Uber; No iPad.

China Takes Drastic Measures To Save The Regime

Chinese President Xi Jinping recently announced that he would take command of all of China’s armed forces, including the People’s Liberation Army (PLA). Xi is already chairman of the Central Military Commission that oversees the army. He is now taking a more direct role as head of the new Joint Operations Command Center, which puts him in operational command of the PLA in times of war. The new title in all likelihood means little in terms of actual command, but it has tremendous political significance. Officially, the Chinese are reforming their military, which is logical (read why here). The roots of this change, however, lie in China’s economic crisis and the need to preserve the regime.

WTF Chart Of The Day: Speculative Frenzy '101'

In the new normal, where bad news is good news, stagnation is growth, and depression is a buying opportunity, it should be no surprise that the so-called "safety stocks" of the Consumer Staples sector have never been more risky. At a P/E valuation of 22x, food, beverage, and tobacco companies have never been more expensive. But, "safety stocks" are not the most expensive stocks in the US equity market...

These Are The Best And Worst U.S. Cities To Own A House

At the top, with annual price increases over 9% and as high as 11.9% in the case of Portland, we also find Seattle Denver and - of course - San Francisco. On the other end are Washington, Chicago and oddly enough, New York. We wonder if Case Shiller used the UMich "random" telephone directory to calculate that NYC home prices rose at precisely the rate of core inflation in the past 12 months while ignoring the dramatic moves in the ultra luxury high end segment.

Why Oil Dropped: Saudis Set To Boost Production In Scramble For Chinese Demand

After meandering steadily higher for the past week, and completely ignoring the negative newsflow out of the Doha meeting, today oil took an unexpected leg lower to 4-day lows, leaving many stumped: what caused this drop? The answer: it looks increasingly likely that the Kingdom is targeting another 0.5-m b/d of sales, bringing its production up to a steadier 11-m b/d or higher as it scramble to regain Chinese market share lost in recent months to Russia.

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...

Weekend Reading: It's Probably A Trap

The “bullish case” is currently built primarily on “hope.” Hope the economy will improve in the second half of the year; Hope that earnings will improve in the second half of the year; Hope that oil prices will trade higher even as supply remains elevated; Hope the Fed will not raise interest rates this year; Hope that global Central Banks will “keep on keepin’ on.”  Hope that the US Dollar doesn’t rise; Hope that interest rates remain low; Hope that high-yield credit markets remain stable.

China's Other Big Problem - Porkflation

For those who believe that broad-based stimulus is coming to save the world from China (via RRR cuts or even pure QE) - as opposed to the hole-filling credit pump they just supported - think again. As we warned last year, this is 'western' thinking as the go to policy of the rest of the world's central banks has been - put on pants, print money, paper over cracks, proclaim victory. However, in China there is one big problem with this... stoking inflation... and most crucially the social unrest concerns when suddenly a nation of newly minted equity - and now bond - losers can no longer afford their pork - which is surging to record highs.

Trump Hints He Would Replace Janet Yellen

Three weeks after angering the mainstream media with his apocryphal assessment that the US "Is Headed For A Massive Recession" and that "It's A Terrible Time To Invest In Stocks", Trump is likely set to make even more waves with an interview he gave to Fortune magazine, which will be released in its entirety later this week, in which Trump says that while he likes Janet Yellen’s low interest rates, he is not a big fan of Janet Yellen herself.  "I think she’s done a serviceable job," Trump tells Fortune. "I don’t want to comment on reappointment, but I would be more inclined to put other people in."

Intel Fires A Massive 12,000 Workers, 11% Of Its Entire Workforce, As It Misses Q1 Sales, Guides Lower

There were some rumors reported late last week that the world's biggest chip maker was about to fire a major portion of its workforce. Moments ago the company confirmed these rumors, when it reported that it was firing a whopping 11% of its entire workforce, laying off a massive 12,000 workers. Confused? Don't be: it's all part of the new normal recovery, and don't forget the spin: don't think of its as 12,000 highly paid engineers and tech workers fired, think of it as 12,000 brand spanking new waiters and bartenders.

One Trader Finally Loses It

"A portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly."

Pepsi Earnings Explained For 17-Year-Old Hedge Fund Managers

Just to help 17-year-old hedge fund managers reconcile the confusion generated by Pepsi's two sets of numbers, the ghastly GAAP ghastly, and the nice non-GAAP, the company continued the tradition of dramatically dumbing down everything that happens in the quarter with yet another admission that it knows very well who its main "investor base" is these days, namely "attention-deficited", 17-year-old hedge fund managers (and algos of course), all of whom need a simple, portable story on which to BTFD (or BTFATH).