recovery

This Is "Worrisome": The Probability Of A US Recession Surges To 60%, Deutsche Calculates

"This relentless flattening of the curve is worrisome. Given the historical tendency of a very flat or inverted yield curve to precede a US recession, the odds of the next economic downturn are rising. In our probit model, the probability of a recession within the next 12 months has jumped to 60 percent, the highest it’s been since August 2008."

America's "Soaring" Gasoline And Oil Demand Was Just An Illusion: How The EIA Fooled The Algos

"Could it be that the U.S. demand that's helped drive a near doubling of oil prices since mid-February was illusory?" That may be a reasonable conclusion to draw from the latest data published by the DOE.  When looking at weekly figures, it looks like U.S. gasoline demand is soaring. But the latest monthly data, showing the numbers for April, paint a very different picture. They show U.S. gasoline consumption falling between March and April. "The discrepancy between the two sets of data that gives cause for concern."

"Our Monetary Humpty-Dumpty Is Heading For A Great Fall" - Teetering On The Eccles Building Wall

So for the third time this century, a business cycle contraction will come without warning from the Fed. Once again the Kool-Aid drinking perma-bulls, day traders and robo-machines will be bloodied as they stampede for the exit ramps. But it is the main street homegamers, who have been lured back into the casino for the third time this century, that will suffer devastating losses yet another time. Indeed, if there were even a modicum of honesty left in the Eccles Building it would be warning about the weakening trends in the US economy, not cheerleading about fleeting and superficial signs of improvement.

"Off The Rails" - What Slumping Rail Traffic Tells Us About The U.S. Economy

The weekly rail traffic report published by the Association of American Railroads (“AAR”) can provide a reasonable snapshot of US economic performance almost in real time by looking at diverse categories of transported goods and commodities. It can also highlight important changes in trends and areas of weakness, or red flags. So let’s see what these indicators are telling us midway through 2016.

Pershing Square Lays Off More Than 10% Of Employees

Pershing Square, one of the worst performing hedge funds of 2015 and 2016, has laid off eight lower-level employees this week, the WSJ reports. The cuts, which largely involve back-office employees in technology and investor services, amount to more than 10% of the activist hedge fund’s staff.

Italy Just Bailed Out Another Failed Bank, May Use Pension Funds For Future Bank Rescues

Overnight, yet another failed Italian bank was bailed out. As the FT reports overnight, Atlante, Italy's privately backed €5bn bank bailout fund which was created in April to stem the threat of contagion from struggling lenders and whose assets turned out to be woefully inadequate, took control of Veneto Banca after a €1bn capital increase demanded by EU bank regulators attracted zero interest.

Bad Earnings, Balance Sheet Rot, & The "Brelief" Rally

Despite mainstream economists hopes that somehow “this time will be different,” the ongoing massaging of economic data through seasonal adjustments to obtain better headlines did not translate into actual prosperity.  Of course, “reality” is a cruel mistress and despite ongoing hopes and overstatements, “fantasy” eventually gives way.

Oil Bulls Beware: Crude Demand Is About To Slide As China's SPR Is "Close To Capacity"

China has taken the opportunity of lower oil prices since early-2015 to accelerate the strategic petroleum reserve (SPR) builds at c.1mbd, pushing the total oil in stock under SPR to an estimated 400mmbbl, or 53 days of net crude oil import equivalent. This volume might be close to the capacity limit and together with potential teapot utilization pullback and slower-than-expected demand from China could increase near-term risks to global oil prices (c.1.2mbd impact).

Confidence Crushed Despite Collapsing Jobless Claims

The trend of jobless claims continues lower (despite a modest 10k rise this week to 268k from a revised lower 258k last week). The problem is... as we have shown numerous times, this 'measure' of the labor market appears to have seasinally adjusted itself into being totally-useless as an indicator of anything factual. With Consumer Confidence for over-55s at its lowest in 2 years, it seems the job exuberance is just not rubbing off...

Frontrunning: June 30

  • Brexiters at war as Johnson pulls bid to be PM (FT)
  • Soros Says Brexit Has ‘Unleashed’ a Financial-Markets Crisis (BBG)
  • World stocks poised for worst month since January (Reuters)
  • China to tolerate weaker yuan, wary of trade partners' reaction (Reuters)
  • China central bank criticizes media for publishing 'inaccurate information' on yuan rate (Reuters)

Day 3 Of Global Post-Brexit Rally: European Stocks, US Futures At Session Highs

Day three of the post-Brexit rally continues, and after some initial weakness due to concerns about Chinese currency devaluation, both European stock and US equity futures were trading at session highs, facilitated by yesterday's stress test results which saw dozens of US banks unleash a tsunami of stock buyback announcement which in turn pushed S&P futures to new post-Brexit highs.

Germany Just Blew Up Italy's Bank Bailout Plan

Germany opposes any attempt to shield private bank investors from losses if Italy pushes ahead with plans to recapitalize lenders. Merkel’s government says that European Union rules on handling struggling banks should apply in any rescue effort, including forcing losses on shareholders and some creditors before public money can be injected. The government in Berlin rejects the argument that the U.K. vote to leave the EU constitutes an “exceptional circumstance.”