recovery

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The ‘pensions time bomb’ looms: pension funds' lack of diversification, and overexposure to traditional assets may cost pension holders dearly according to research we have just released. Pensions allocations to gold are very low internationally and yet gold has an important role to play over the long term in preserving and growing pension wealth.

Frontrunning: April 25

  • Russia raises interest rates to 7.5% (FT)
  • Shanghai to Allow Raw Material Exchanges in Trade Zone (BBG)
  • US, Japan Fail to Clinch Trade Deal (WSJ)
  • 'We don't have a magic wand', says ECB's Constancio (Reuters)
  • Tokyo Inflation Quickens to Fastest Since 1992 (BBG)
  • Demand for Home Loans Plunges (WSJ)
  • EU banks urged to grasp chance to raise capital (FT)

Guest Post: Demography + Debt = Doom

A ‘Perfect Storm’ of demography and debt will economically and financially doom almost every country on earth. It will be TEOTWAWKI – ‘The End Of The World As We Know It’. No, it’s not the end of life or even the end of civilization. However, when it’s all over, nothing will ever be the same and that includes the disappearance of much of the middle class.  The good news - The storm won’t last forever. The bad news is there will be much more pain before it ends unless you make an effort to understand what’s happening and why.

Schizophrenic Stocks Close Mixed As 30Y Yield Nears 10-Month Lows

Euphoria over Apple channel-stuffing and non-GAAP magic for Facebook quickly turned into the HFT-liqudity-providers nightmare as rumors of an emergency Putin press conference sent USDJPY tumbling lower (and therefore US equities). Once the rumor passed - and despite all the facts on the escalation - stocks bounced (especially Nasdaq) to close mixed. S&P and Dow unchish, Nasdaq +0.5%, Russell -0.5%. VIX was in charge in general once the ramp was under-way but even that went into crazy mode as algos lost the plot. Credit markets are "deniers" of the exuberance as are long-end Treasuries which rallied another 2bps and near 10-month lows. Gold was monkey-0hammered early but rallied on Putin's comments and closed unchanged for the week above $1290. Copper rallied notbaly eback above its 50DMA and Oil limped higher as the USD flatlined.

Schadenfreude: Economists "Stunned" By Housing Fade

Since 2012, almost every economist has predicted that the housing recovery would continue into each coming year and would be a key driver of economic growth. That was again the plan for 2014, but with the housing recovery now on the ropes those same economists are perplexed as to why. Yet, "hope" remains that the recent slowdown is just a "weather related" casualty. The slowdown in housing is not due to the "weather." It began prior to the onset of the recent winter blasts. Nor will reduced distressed sales, delinquencies, negative equity or rising inventories salvage the predictions. These are all indicators "OF" the housing market, but not what "DRIVES" the housing market. The real answer to the slowdown in housing is not so difficult to comprehend...

Exactly Like 7 Years Ago? 2014 Is Turning Out To Be Eerily Similar To 2007

The similarities between 2007 and 2014 continue to pile up. And you know what they say - if we do not learn from history we are doomed to repeat it.  Just like seven years ago, the stock market has soared to all-time high after all-time high.  Just like seven years ago, the authorities are telling us that there is nothing to worry about.  Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.

Is VIX (Even More) Broken?

The "v"-shaped recovery in US equity indices is largely being ignored by bonds, JPY, and credit for now as VIX is in charge of the ramping efforts for now... until the last few minutes when it all went a bit pear-shaped...

A Stunning 80% Of All New York, Florida And Nevada Condo Purchases Are "All Cash"

Back in August of last year, we first reported data that not even believed at first, but has since been proven correct using existing home sales data, namely that a whopping 60% of all home purchases are "cash only." However, not even that data could prepare us for what we learned today courtesy of CoreLogic, which narrowed down the range from the broader "housing" segment just to the most appetizing (especially for investors and flippers) condo market. What it found was stunning: not less than 80% of all condos in key markets such as Florida, Nevada And New York are all cash.

Futures Creep Toward All Time Highs Again

While events in Ukraine have once again broken out into lethal fighting, and in a surprise development the Chinese Yuan crossed the 6.25 line for the first time in two years threatening to accelerate the unwind of carry trades which have a 6.25-6.30 point of max pain, futures remain completely focused solely on the strong after-hours results from Apple and Facebook which have helped push Spoos overnight to near record levels once again. The biggest push was given to NASDAQ futures which are back up 1% with optimism for US tech returning with the material earnings beats from both Apple ($11.62 EPS vs Est $10.17 EPS) and Facebook ($0.34 Adj EPS vs $0.24 forecast). Shares in both companies rose in afterhours trading with Facebook up +5% and Apple up more than +7% (supported further by the announcement that the company was expanding its share buyback plan to $90bn from $60bn). Not even the Nikkei being down 1%, the SHCOMP down 0.5% and the USDJPY once again treading water could put a dent in the tech-driven euphoria, which somehow also managed to slam gold and silver to month lows.

Groupthink Or Black Swan Rising? Not A Single 'Economist' Expects An Economic Downturn

This doesn't happen very often. Marketwatch reports that Jim Bianco points out in a recent market comment that the 67 economists taking part in a regular Bloomberg survey have a unanimous forecast regarding treasury bond yields: they will be higher 6 months from now... and a separate poll of economists recently showed that exactly zero expect the economy to contract. This is an astonishing degree of consensus thinking, but it perfectly mirrors the complacency we see in stock market sentiment and positioning data. The probability that such a unanimous view will turn out to be correct is traditionally extremely low. The economy is likely resting on a much weaker foundation than is generally believed. This is not least the result of massive monetary pumping and deficit spending, both of which tend to severely weaken the economy on a structural level, even though they can create a temporary illusion of 'growth'.

Housing Bubble Pop 2.0: Remodeling Collapses To 1 Year Low

On the way up, every sell-side strategist points to remodeling as a leading indicator for the housing recovery as confidence in the value of their home prompts real people to "invest" in upgrades and remodel their homes. That has been the story... until now. As NARI reports, the Remodeling Business Pulse (RBP) data of current and future remodeling business conditions show current condition ratings fell significantly in March - in fact they fell from multi-year highs to one-year lows as "homeowners remain slow to make the decision to move ahead with higher-priced projects." Of course, weather is blamed, and they are 'optimistic' about the future, but one look at the chart below and it is clear something changed...

Explaining The Horrendous Home Sales Report: It Snowed Everywhere But In The Northeast

This is our best attempt at playing clueless propaganda cheerleaders also known as economists:

Q. Why did new home sales crash in all regions except the traditionally coldest, wettest, and snowiest Northeast, where sales rose?

A. Uhm, because it obviously snowed everywhere except in the Northeast.

And there you have it: spin 101 for braindead zombies and vacuum tubes.

US PMI Drops, Misses By Most In 8 Months

That February spike that was the catalyst for oh so much aggressive JPY selling and US equity buying and "see, we told you so, here comes the post-weather pent-up-demand exuberance" has been crushed by the sad and painful truth of reality. For the 2nd month in a row, Markit's US PMI dropped and missed expectations... despite weather being a thing of the past. Sadly the story gets worse, as Markit notes "on the inflation front, manufacturers experienced a further solid increase in average cost burdens in April," adding that pricing pressures, "will feed fears that the recovery remains on a weak foundation of intense price competition." Need moar snow...

The Fed's Farcical Forecast Fiasco

The chart below, which summarizes 5 years of Fed "forward guidance" on that most critical of variables - the Fed Funds rate - proves two things:i) there is nothing worse in this world than being a Fed Funds, or Eurodollar, trader, considering 5 years of forecasts have been systematically destroyed by a Fed which has failed time and time and time again to stimulate the economy enough to push it away from ZIRP (and why any hope for the first rate hike in mid-2015 are idiotic), and ii) when it comes to central planning, the economists that now openly control the bond and stock market and increasingly more of global capital flows, have absolutely no idea what tomorrow brings perversely, since it is their actions that have made the required outcome - a self-sustaining, economic recovery - impossible.

Algos Getting Concerned Low Volume Levitation May Not Work Today

It has been exactly six days in which algos, reversing the most recent drop in the S&P with buying sparked by a casual Nikkei leak that the BOJ may, wink wink, boost its QE (subsequently denied until such time as that rumor has to be used again), have pushed the market higher in the longest buying streak since September, ignoring virtually every adverse macroeconomic news, and certainly ignoring an earnings season that is set to be the worst since 2012. Today, the buying streak may finally end on rumors even the vacuum tubes are scratching their glassy heads if more buying on bad or no news makes any sense now that even the likes of David Einhorn is openly saying the second tech bubble has arrived. Keep an eye on the USDJPY which has had seen some rather acute "trapdoor" action in early trading and is approaching 102 after breaching its 55-DMA technical support of 102.38. If the support is broken here we go again on the downside. Keep an eye on biotechs and GILD in particular - if the early strength reverts into more selling again (after the two best days for the biotech space in 30 months), the most recent euphoria phase is now over.