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Where Did All The Hope Go?





Following last night's expectations-filled State of the Union speech, we know that housing is rebounding and our stock market is rising but while these are pointed to as evidence that we are on the right track, it appears, from these three charts, that expectations for hiring, capital expenditure, and retail spending is bad and getting worse. Of course, the divergence between our current market's reality and an uncertain future is nothing new - but the spread is starting to become untenable as even with stocks at five-year highs, confidence remains weak. Simply put, the people know reality and only the talking-heads choose to ignore it.

 
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Retail Sales Come In Line, Ex-Autos/Gas Slight Miss





In what may come as a surprise to some, advance retail sales for January printed on top of expectations of a +0.1% increase in sequential sales, although the forecast range was very wide, from -0.7% to +0.6% as many analysts were concerned what the impact of the payroll tax expiration would be on sales. This is a moderation of the January growth when retail sales rose 0.5%.  And while the headline number was goldilocks, the core reading excluding autos and gas came at 0.2% or slightly below expectations of a 0.4% print. What was even more curious is that the commerce department said department store sales rose the most since February 2012. Retail sales “relatively flat” as end of tax holiday likely had effect, says Bloomberg Government economist Nela Richardson. In B-grade economic news,  import price index up 0.6% M/m vs est. 0.8%  increase(range 0.2%-1.2% gain); prior revised to 0.5% drop from down  0.1%.

 
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Platinum And Palladium Rise On Supply Concerns – Zimbabwe Now





Platinum and palladium surged Tuesday on renewed concerns that supplies of the platinum group metals will shrink. Zimbabwe's government has given platinum producers two years to begin refining the precious metals in Zimbabwe. This means that production of platinum will drop, because mining companies are now expected to build refineries – something which they may not do, due to the real risk of confiscation and nationalisation of assets. Both metals climbed more than 1% yesterday with platinum for April delivery rising $21.10 to settle at $1,717.2/oz. Palladium for March delivery rose $12.80 to $771.40/oz. "The worry is that it's going to restrict production," said James Steel, chief commodities analyst at HSBC in New York. "That was the prime motivator for the price movement today."

 
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60 Days Without A 5% Correction And Counting





The beginning of every year under the New "centrally-planned" Normal regime is no stranger to seemingly relentless rallies: while in the first 29 trading days of 2013 alone, the benchmark S&P 500 Index has gained a respectable 6.5%, such initial strength out of the gates has in fact been the norm over the past three years, with the S&P 500 returning 7.5% and 5.7% during the first 29 trading days of 2012 and 2011, respectively. And, just like in 2013, both prior occasions were spun by pundits as indicative of great rotations, economic recoveries and what not, until reality reasserted itself when the gobs of liquidity pumped by western central banks finally made their way to China and sent local inflation surging at which point China pulled the plug in the "great reflation." This time will not be different, especially since as we showed yesterday, the market is now more bullish than 99% of all prior readings. And while the recent spike in the market has been less acute than on previous occasions, what is notable about the current rally is the duration without any marked correction. As the following chart from Stone McCarthy shows, since March 2009, there have been only 4 times in which the rally continued for a longer period of time without a notable, or >5%, correction.

 
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ECB Smacks Down Euro Again, Says EUR Strength Will Hurt Recovery In Crisis States





Just like yesterday, it was some anonymous Yen vigilante smacking down the USDJPY saying the initial G-7 statement was misinterpreted, so today it is the ECB's turn, which just smacked down the EUR royally, for the second time in a week following last week's Mario Draghi comments, when it said that:

  • THE ECB IS WORRIED EURO STRENGTH WILL HURT RECOVERY IN CRISIS STATES

And just like yesterday the refutation came via shady pathways, i.e., an anonymous leak in D.C., so today, apparently the information comes from that venerable ECB conduit: Bild. What can one say - all is fair in central bank love and currency war.

 
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Frontrunning: February 13





  • Obama Paints Wider Role for Government in Middle Class Revival (BBG)
  • Obama to Seek a New Trade Deal With EU (WSJ)... or this is strawman why 2016 GDP will be higher
  • Mobile phone sales fall for the first time since 2009 (Telegraph)
  • Sequester Looms, No Deal in Sight (WSJ)
  • Neither US party swallows a compromise (FT)
  • Embattled Economies Cling to Euro (WSJ)
  • For China, Spending Is Harder Than It Looks (WSJ)
  • Bank of England's Sir Mervyn King says recovery in sight (BBC) - just a little more inflation first
  • G7 fails to defuse currency tensions (FT)
  • Japanese Leader Urges Firms to Boost Wages (WSJ) - so does the US one
  • Fed Bank Chiefs Back Money-Fund Overhaul (WSJ), or force everyone out of MMFs and into stocks
 
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Cable Snaps As Bank Of England Welcomes The Currency Wars





Following yesterday's G-7 announcement which sent the USDJPY soaring, and its embarrassing "misinterpretation" clarification which undid the entire spike, by an anonymous source in the US who said the statement was in fact meant to state that the Yen was dropping too fast and was to discourage "currency wars", it was only a matter of time before another G-7 country stepped into the fray to provide a mis-misinterpretation of the original G-7 announcement. That someone was the BoE's outgoing head Mervyn King who at 5:30 am eastern delivered his inflation reporting which he said that "it’s very important to allow exchange rates to move," adding that "when countries take measures to use monetary stimulus to support growth in their economy, then there will be exchange rate consequences, and they should be allowed to flow through." Finally, King added that the BOE will look through CPI and relentless UK inflation to support the recovery, implicitly even if it means incurring more inflation.

 
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#SOTU - The Summary: Minimum Wage, Maximum Genomes, Macs, And Moar Cyber-Security





5% fewer words, slightly shorter than last year but just as hope-full. From a hike (and inflation-indexed) in the minimum wage to a 140x multiplier of genome sciences investment (now that is Keynesian awesomeness); from extending homeownership (and refinancing plans) even more to energy independence; from Apple, Ford, and CAT's US Manufacturing to Bridge-Building and infrastructure spending; and from Trans-Pacific and -Atlantic Trade to cyber-security; it's all gonna be great - because as President Obama reminded us at the start... "Our housing market is healing, our stock market is rebounding," and this won't add a dime to the deficit... oh and that Student loan bubble - no worries, there's a college scorecard so now you know where to get the biggest bang for your credit-based buck. Summing it all up: Guns 9 : 3 Freedom ; Jobs 31 : 17 Tax ; Congress 17 : 40 Work ; Recovery 2 : 0 Unicorns ; Spending 3 : 2 Cutting

 
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The (Two) GOP #SOTU Responses





Well, this is awkward, but in our always fair and balanced way, we present the two sides of the GOP's response to Obama's SOTU - the 'official' Marco Rubio response and Rand Paul's Tea Party Express response, with speech excerpts and streams...

“If Congress refuses to obey its own rules, if Congress refuses to pass a budget, if Congress refuses to read the bills, then I say: Sweep the place clean. Limit their terms and send them home!”

 
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And Summarizing It All...





 
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The State Of The Union - Live Webcast





*OBAMA CALLS FOR MINIMUM WAGE TO INCREASE TO $9/HOUR

Last year's 6,977 word homage to jobs provided just over an hour's worth of applause-impacted rhetoric create much ado - more with what was not said than what was said. This year's 9pmET speech will likely be dotted with hope, and change, and jobs, and congress, and of course our union is strong... because the S&P is up 16% since last year's SOTU. But, by our measurement from Bloomberg's data from December 2011 (the last NFP before 2012's SOTU) to January 2013 (this year's last NFP) - Non-Farm Payrolls (NSA) dropped from 133.292 million to 132.705 million (or a 587,000 job loss).

  • *OBAMA SAYS `GENERATION'S TASK' IS TO BUILD STRONG MIDDLE CLASS
  • *OBAMA SAYS GOVERNMENT MUST WORK `ON BEHALF OF THE MANY' NOT FEW
  • *OBAMA SAYS PROPOSALS WILL NOT INCREASE DEFICIT BY `SINGLE DIME'
  • *OBAMA CALLS FOR `SMARTER GOVERNMENT' NOT `BIGGER GOVERNMENT'
  • *OBAMA ORDERS DHS TO DEVELOP REAL-TIME CYBERSECURITY RESPONSE

Enjoy...

 

 
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Dorner's Last Stand - Live Webcast





It appears that the authorities have finally caught up with the infamous LAPD vigilante, who is now engaged in a shoot out with the police in the Big Bear area. Follow his last stand at the following CBS newsfeed live. A separate stream from the inland CHP can be found here.

 
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The Thinking, Drinking, And Gambling Man's Guide To The State Of The Union





Over the past couple of hundred years, the State of the Union has been enjoyed by pamphlet, radio, TV, and webcast and each and every year, the citizenry has sat avidly awaiting their 'word' to come up on SOTU Bingo or for the bets they made on the average length to be confirmed. As WaPo notes, the average minutes spent on the address has grown from a mere 36:53 under President Jimmy Carter up to 1 hour and 5 minutes under the current president. From comparisons of various word frequencies (e.g. tax vs cut or job vs hope) to the ultimate SOTU Drinking Game, and from an 51/53 minute over/under to the color of Obama's tie, below is everything you need to know about SOTU but were absolutely embarrassed to ask...

 
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Sentiment More Bullish Than 99% Of All Prior Readings





Movements in equity prices are driven by many factors, such as the economy, government policy, earnings, interest rates and valuation. But we think tactical moves (<3 months) are often better explained by sentiment, positioning and technicals. While macro, policy and valuations matter, sentiment has worked well in recent years as a contrarian tool to identify short-term inflection points in asset prices. According to BofAML's new Bull & Bear Index investor sentiment toward risk assets is at a more bullish level today than 99% of all readings since 2002. The current reading of 9.6 (out of 10) is close to max bullish and thus triggers a contrarian "sell" signal for risk assets. In their view, the relative risk-reward of owning equities is unfavorable at this juncture. Since 2002 a "sell" signal of 8.0+ was on average followed by a 12% peak-to-trough correction in global equities within three months.

 
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