Non-bombastic overview of the forces influencing the capital markets in the week ahead.
On an almost daily basis, investors are reassured that a falling oil price is "unequivocally good" for the US economy. The "It's like a tax cut for the consumer"-meme dominates financial media while the impact on the Shale (or tight) oil industry is shrugged off blindly with "well breakevens are low, right?" As Barclays shows in the chart below, the breakeven price for oil to shut-in tight-oil supply varies by region (and corporation) adding that at $80/b WTI, most producers will sweat it out. But, they warn, if prices remain at these levels through 2015, it could compromise the significant potential new volumes that are needed to offset declines from existing wells. This new, higher-breakeven volume is small in 2015, but becomes much larger in 2016 (with a 17-25% plunge in earnings which would drastically reduce capex... and thus The US Economy).
Just for fun, let's look at one chart and ask one question: is this stock continuing its downtrend or is it in the process of reversing?
What if global capitalism is not about to collapse? What if the sun rises next week, and the great apocolypse called for and predicted does not materialize yet, what then for the dollar?
Another month, another $14.5 billion increase in student and car loans, offset by a measly $1.4 billion in credit card debt, following last month's upward revised $200 million drop in revolving debt. Total consumer debt in September increase by $15.9 billion, just below the $16.0 billion estimate, and the problem is that with the Fed's credit injection fading, someone has to step on the borrowing pedal. Alas, if one takes away student and car loans, the credit creation is not nearly enough to push US consumption higher. In any event, the most amusing chart is the following. It simply screams sustainable.
Speaking from The Bank of France is crap-covered Paris, Janet Yellen stated that "bond purchases have ben effective", and encouraged Mario Draghi to print moar, noting "central banks need to be prepared to employ all available tools, including unconventional policies, to support economic growth and reach their inflation targets," but warned from the other side of the her two faces, that, "policy normalization will lead to heightened volatility."
In October the US economy added the most waiters and bartenders in over a year. In fact at 42K, one in every five jobs "created" in the US economy went to a bartender, or a waiter.
- The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare (Matt Taibbi)
- Explains the midterm results: Optimism precedes job data (Reuters)
- EU Dream Ebbs Amid Weak Growth, Putin's Jets, 25 Years After Wall Came Down (BBG)
- SEC Probing Trading Activity at Apple Supplier GT Advanced (WSJ)
- Boehner touts bills to repeal Obamacare, build Keystone (Reuters)
- China Gold Buying Means Price Floor to Standard Chartered (BBG)
- High-Speed Ad Traders Profit by Arbitraging Your Eyeballs (BBG)
- Central Banks Can’t Be ‘Only Game in Town’ Boosting Economies (BBG) - less talking, more getting to work
Dozens of young people camping out at the front of a popular store... can only mean one thing?
The Keynesian notions of “potential GDP” and “aggregate demand” have no basis in the real world. They are revealed doctrine. They are the religion of the state’s economic policy apparatus. Its bad enough that this destructive economic religion leads to the farcical forecasting games evident in the EC’s chronic updates and slow-walks of the GDP numbers down. The evil, however, is that the Keynesian apparatchiks will not desist in their destructive money printing and borrowing until they have suffocated free market capitalism entirely, and have monetized so much public debt that the financial system simply implodes.
The ECB will not be able to implement a QE program. Even Ben Bernanke admitted it.
Every day for the past several years, sometime after 3pm, bullish market participants exhale a sigh of relief when as if out of nowhere, an "unexpected" surge of buying lifts stocks into the 4 pm close. There are several explanations for what some have dubbed if not Divine, then certainly centrally-planned intervention. This is the time when ETF creation and (far less frequently) redemption takes place. As a result, in a world in which the bulk of liquidity has shifted away from single name stocks and even futures toward ETFs, trends in the creation and redemption of ETFs are key to watch to determine how the market may move purely for to technical reasons (since fundamentals died some time in 2009). Which is why we note, with little surprise, that according to SocGen, Equity ETFs posted a record level of monthly creations in October, driven by US, regional eurozone and UK indexations, perhaps explaining the relentless levitation of the market on ever lower volume especially in the latter part of the day.
Having served up a large bowl of nothing with the official statement, the job of jawboning 'hope' for future monetary policy idiocy falls once again on Mario Draghi's shoulders as he takes the stage in what may well be a highly contentious press conference. Will he admit the mutiny? Will he 'fess up that OMT is a mirage? Will he admit to being a secretive dictator? Will he remove his spectacles and angrily point at a reporter?
Prepare For ECB Disappointment: 'We Do Not Expect Any Additional Easing To Be Announced", Goldman WarnsSubmitted by Tyler Durden on 11/06/2014 07:29 -0500
"we do not expect any additional easing to be announced in addition to the various measures adopted between June and September. We expect Mr Draghi’s remarks to be focused on the Comprehensive Assessment of Euro area banks, and on the fact that the decline in oil prices is lowering headline inflation in most advanced economies."
At 12:50pm Tokyo time, Nikkei 225 Index was sitting pretty, up 0.5% for the day. Then came the tumble. Over the next 22 minutes, Nikkei Index lost 1.8% to touch intraday low of 16,725.45. USD/JPY followed suit, but with a lag, based on data compiled by Bloomberg; currency slid from 115.38 to 114.46 during that period, marking 0.8% drop. Japanese banks sold down Nikkei to take some money off the table, given its 8% advance since Oct. 31 when BOJ announced its latest easing, which in turn caused USD/JPY to retreat, according to a Tokyo-based FX sales trader. Nikkei 225 closed down 0.9%, reversing earlier gain of as much as 0.6%