Russian Ruble makes historic recovery. Russia is a world economic power - and open for business. Udachi!
“Workers struggle to cope with this denial of a basic human need. They urinate and defecate while standing on the line; they wear diapers to work; they restrict intake of liquids and fluids to dangerous degrees,”
After last week's key event, the retail sales number, which the market discounted as being too unrealistic (and overly seasonally adjusted) after printing at a 13 month high and attempting to refute the reality observed by countless retailers, this week has a quiet start today with no data of note due out of Europe and just Empire manufacturing (which moments ago missed badly) and the NAHB housing market index of note in the US session this morning.
The “recovery” is over. The US economy is heading into, if not already IN a recession.
The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales and Industrial Production, and following Friday's disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.
With Russian stocks among the best performing in 2016 - and up dramatically since The White House issued its "sell" rating - it appears another key element of American's hegemony is also breaking down. When the US (and its European vassal states) unleashed sanction on Russia in July 2014, it sent bond yields spiking from 9% to over 14% as political and social risks were priced in (as demanded by Treasury). However, despite the ongoing sanctions and the pressure (whether implicit or explicit from Washington) on oil prices, Russian bond yields have disobeyed America and are back below 9% - the lowest level of risk since before sanctions were imposed.
"We expect that the return of some of these outages as well as higher Iran and Iraq production will more than offset lingering issues in Nigeria and our higher demand forecast. As a result, we now forecast a more gradual decline in inventories in 2H than previously and a return into surplus in 1Q17, with low-cost production continuing to grow in the New Oil Order. This leads us to lower our 2017 forecast with prices in 1Q17 at $45/bbl and only reaching $60/bbl by 4Q17."
Investors are fleeing and volumes are falling due to extreme valuations amid global uncertainties related to monetary policy and political decisions made in wake of the 2007-2009 financial crisis. It’s a flight that’s creating a negative feedback loop. "First it’s China, then Japan, then the ECB. When you singe the fingertips of speculators, they don’t like to play anymore," says Brean Capital managing director Russ Certo. Investors "are stewards of other people’s money and they don’t want to allocate capital to a pyramid scheme."
"As we continue to search the world for changes in trend, we must objectively report that there have been no changes to trends in economic growth. Around the world, growth continues to GRIND lower. Countries that were once high fliers, have now become low fliers. Countries that were once Steady-Eddies, have now become Wobbly Willies. And Countries that were once Nervous-Nancies have become Panicking Patty’s."
The current rash of cautious ignorant optimism is so very reminiscent of the period right after Bear Stearns in 2008. Ben Bernanke as late as June 2008: "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Janet Yellen said, “the strong incoming data on spending eased my fears that we are in or are approaching a recession regime” before expressing confidence in rate hikes starting in December 2008! The mainstream takes the absence of further liquidation as if there will be no more liquidations when in fact the likelihood of more of them only rises the more they are artificially “contained.”
The employment-to-population ratio for those 65 and over is at its highest level since the early 1960's, creating a bottleneck for younger workers who are looking to move up from their current roles, and also those that are trying to gain entry level employment but can't until the current occupiers of those seats can move up. The situation doesn't appear to be on the verge of getting any better either, as 27% of Americans say they will "keep working as long as possible" according to a 2015 Federal Reserve study - and to make matters worse (for younger generations), 12% of Americans say they don't plan to retire at all.
At the end of the day, the seasonally maladjusted data for April retail sales amounts to no more than a swiggle in the larger trend. To wit, consumption spending financed by the growth of transfer payments and household borrowing is coming up hard against Peak Debt, while tepid growth in wage and salary income remains hostage to a domestic economy plagued with structural barriers to growth, an aging business cycle and a gathering global recession from which it is not remotely decoupled. So contrary to Reuters and its Keynesian quote standbys, it is not true that “the demise of the U.S. consumer have been greatly exaggerated”. Actually, it can be hardly exaggerated enough.
OPEC is dead, and that’s the biggest news for oil in this new century.
After issuing a record $1 trillion in combined bank and shadow loans in the first quarter which just like during the financial crisis provided a short-term catalyst for global growth (and sent China's debt/GDP to new all time highs) China's dramatic debt issuance binge is about to hit a brick wall. The reason: combined new loans in April by the Big Four state-owned banks were more than halved from March's level.
Don’t blame those poor consumer’s for not spending – they are spending everything they have and then some.