recovery

"Given the surge back towards the all-time highs in the S&P 500, we think that the best might be over for US equities and that indices might range trade more in 2016. We have downgraded US equities to neutral. This takes our overall equity weighting down to neutral, in many respects an extension of what we’ve been doing for most of this year as richer and richer asset markets, against a global background of economic risks, have made us more cautious."

Update: PSPP extended to March 2017 "or beyond", regional debt added to QE-eligible asset pool

Having just let everyone down with a less-than-spectacular 10 bps depo rate cut, Mario Draghi will now try to appease a spoiled market by announcing an expansion and/or an extension of PSPP. 

Yesterday's market swoon which unwound all of Tuesday's gains on concerns about a hawkish Fed and fears about terrorism in the US, are now completely forgotten, and have been replaced with the latest daily round of pre-ECB euphoria, driven by hopes that Mario Draghi will announce even more dovish details to Europe's Q€ 2 than just a 10 bps rate cut and a boost to QE more than €10 billion, both of which have been already priced in.

"Do I think they’re going to pay within 30 days? No. The 30 days are not going to make any difference."

The resistance to such an awakening is understandable if still lamentable. If recession is truly the looming assurance, as it increasingly appears, that would mean not just the end of the recovery but the end of “accommodation” as a given force. In other words, Janet Yellen and the OECD start backwards from their endpoint because of their unshakable faith in monetarism, a faith that actually defines how they think an economy does work (and how they produce the core assumptions in their models); should that path from here to there completely unravel, so, too, does their assumed power and philosophy.

Spot the year that the "data-dependent" Fed will raise interest rates...

Look out below, for even with bloated federal spending, the real economy has hit stall speed.

"Finding customers" remained the dominant concern for euro area SMEs in the survey period, with 25% of euro area SMEs mentioning this as their main problem. "Access to finance” was considered the least important concern (unchanged at 11%)."

With the EUR plunging and everyone primed for dramatic action by Draghi, especially following today's disappointing inflation data where November CPI rose just 0.1%, below the 0.2% expected, the former Goldmanite may still disappoint. According to Market News, "the high bar set by expectations, coupled with notable opposition against aggressive action on the Governing Council as economic data developed largely as expected, creates a risk that the ECB will under-deliver Thursday."

• Yellen, in back-to-back appearances, could close out era of zero rates (Reuters)
• ECB stimulus hopes keep Europe stocks at three-month high (Reuters)
• ECB to Test the Limits of Its Bond-Buying Program (WSJ)
• Watch for U.S. recession, zero interest rates in China next year, Citi says (Reuters)
• Euro’s Loss Being Yen’s Gain May Be Headache for BOJ (BBG)
• Yahoo Board to Weigh Sale of Internet Business (WSJ)
• Islamic State Prevents Civilians From Fleeing Iraqi City of Ramadi (WSJ)

It is only logical that a day after the S&P500 surged, hitting Goldman's 2016 target of 2,100 more than a year early because the US manufacturing sector entered into a recession, that Europe would follow and when Eurostat reported an hour ago that European headline inflation of 0.1% missed expectations of a modest 0.2% increase (core rising 0.9% vs Exp. 1.1%), European stocks predictably surged not on any improvement to fundamentals of course, but simply because the EURUSD stumbled once more, sliding by 40 pips to a session low below the 1.06 level.

In a perfectly timed update to his infamous April 2009 "worse then The Great Depression" chart, Kevin O'Rourke has unveiled his latest chart-du-poor. With US manufacturing collapsing, bond yields tumbling, and The Fed about to hike rates to prove they can, this so-called 'recovery' has fallen below that following The Great Depression. As O'Rourke sums up, "pretty dismal stuff. Let’s hope that we can at least avoid the famous 1937-38 double dip."

With the dismal 10% drop in China Zhongdi Dairy's IPO as it started trading, it appears Chinese investors are losing faith in the highest-flying stocks. Following Monday's miracle afternoon rescue, ChiNext (tech-heavy) and Shenzhen (tech and growth-heavy) indices are plunging. Shanghai, which initially rose thanks to strength in housing stocks, has given up all its gains as last night's Schrodinger PMIs were neither good nor bad enough to prompt immediate massive monetary liquidity tsunami.

The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money... The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.

It is vital to give proper consideration to the improper liberties that are being taken by those with “unwarranted influence” and “misplaced power”.   Value extraction has replaced value creation in pursuit of short?term, self?serving benefits at the expense of long?term stability and durability of corporate America and therefore the country as a whole.  As citizens, our obligation is to be well?informed, cognizant, outspoken and to vote. The words of men may temporarily suspend but they do not alter the laws of financial dynamics. The fundamentals always take precedence eventually.