recovery

If the government’s official statistics are to be believed the U.S. economy is moving full steam ahead. Consumer are spending, the job market is expanding, real estate has recovered, stocks are soaring and the U.S. dollar is stronger than it has been in a decade. But if you have yet to realize it, billionaire investor Eric Sprott says "it’s all a lie." The manipulation of precious metals, coupled with the supply and demand fundamentals which Sprott says will lead to shortages over the next few years as mining companies reduce output or close up shop, will leave many investors who think their gold holdings are easily convertible to physical assets with nothing more than depreciating Yellen Bucks at exactly the moment they’ll need precious metals in their possession.

All great monetary fiascos are forged upon a foundation of misperceptions and flawed premises. There’s always an underlying disturbance in money and credit masked by supposed new understandings, technologies, capabilities and superior financial apparatus. The notion back in 2006 and 2007 that the world was at the brink of a major crisis was considered absolute wackoism. Incredibly – and well worth contemplating these days - virtually no one saw the deep structural impairment associated with the protracted Bubble in “Wall Street Finance.” An even more momentous monetary fiasco has been perpetrated since the 2008 crisis, constructed upon a foundation of even more outlandish misperceptions and flawed premises.

With enough monetary deception anything’s possible. But, nonetheless, gravity still exists.

Spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before 2008! 

By now, everyone knows Brazil is stuck in a stagflationary nightmare that's made immeasurably worse by the country's seemingly intractable political crisis. But what about the rest of Latin America? Goldman takes a close look at the regional outlook for the next four years and finds a decidedly unfavorable growth-inflation mix. 

Liquidity in the junk (and all other markets) is evaporating, and according to Citi the spread between an illiquid and liquid junk bond portfolio just hit 100 bps, the most in the history of the series. Meanwhile according to Mohamed El-Erian "The market is comfortable that whenever we hit a hiccup, the Fed is going to come back in," he said. "It's very deeply embedded that central banks are our best friends forever."

Americans have taken on more revolving debt (credit cards basically) since March than they did the previous three years combined. Economists are, as you would expect, nearly ecstatic over the impoverishment. To them, it signals the final capitulation of consumers to that which Janet Yellen has been professing since her term began. But there is a huge problem with that view; if consumers are borrowing, what are they doing with the balances? Instead, this discontinuity can only be consistent where consumers are completely out of options. If there are noticeably fewer goods being shipped here and within here, the US, and borrowing has just exploded at the same exact time then it is rather easy to conclude far more of full recession than recovery.

Importantly, while the "bias" of the market is to the upside, primarily due to the psychological momentum that "stocks are the only game in town," the mounting risks are clearly evident. From economic to earnings-related weakness, the "bullish underpinnings" are slowly being chipped away.

The sums in play are so staggering (an estimated $11 trillion in emerging market debts denominated in other currencies) that even the Fed won't be able to stop the meltdown.

Janet Yellen’s astonishing letter to the Speaker of the House, Paul Ryan, is a sign that the central bank is panicking over the fact that Congress is unhappy with the job it has been doing.

"So much of what we now accept as routine in financial markets would have been thought impossible prior to the 2008 crisis ?- the next logical stage in the global currency war will be direct fx intervention!"

- Albert Edwards

Why would companies hire more people if they’re selling less stuff? The answer is that they probably won’t.

Yesterday, there was pent up expectation that the ECB's latest minutes, by being structurally dovish and thus the opposite of the Fed's own minutes, would unleash another round of EUR weakness. This did not happen, and instead not only did the EUR jump during the day, but the USD saw an unexpected round of all day weakness. Many were surprised by this response. It turns out Mario Draghi was merely biding his time, and in a speech released moments ago, titled "Monetary Policy: Past, Present and Future" delivered at the European Banking Congress, Draghi pulled another "whatever it takes" card, and promptly sent the Euro currency reeling, if only for the time being.

The Fed was out in force yesterday peddling some pretty heavy-duty malarkey about the up-coming rate liftoff at the December meeting..."If we begin to raise interest rates, that’s a good thing." That’s not a bad thing." Goldman is putting out the final mullet call for this Bubble Cycle because it knows that this bull is dying; that insiders still have massive amounts of stock winnings to unload; and that the clock is fast running out. The expiring clock is evident in the S&P 500’s one-year round trip to nowhere. Despite the fact that the Fed has ponied-up a stick save at every single meeting this year, the market’s 27 separate efforts to rally have all failed for the simple reason that the jig is up.