Lehman

After a very modest bounce in April, Philly Fed fell again in May, printing a disappointing 6.7 (against 8.0 expectations). Philly Fed has now missed 5 of the last 6 (and 7 of the last 9) months. While new orders picked up, prices paid plunged at recessionary pace, inventories tumbled, and the average workweek slumped. Hope also tumbled as future expectations dropped.

Sentiment towards gold is as bad as we have seen it since the 2003/2004 period. Bitcoin is the more sexy thing. People want to talk about bitcoin and anything with “bit” in the name seems to be doing very well. Whereas gold is very much less sexy ... for now ...

According to Goldman, "low gas prices should have boosted Q1 consumption growth by 0.5-1pp, reinforcing the Q1 disappointment. However, the models also imply that only one-fourth to one-half of the eventual consumption impact should have been felt by Q1, suggesting plenty of remaining upside in coming quarters." Here is the one problem with that assumption...

Not content with building single-family houses (and WinSun's own office), WinSun recently made history when it demonstrated the world's first entirely 3D-printed five-story apartment building and a 1,100 square metre (11,840 square foot) villa, complete with decorative elements inside and out.

Central bank liquidity lines like those the Fed used to bailout the world seven years ago have become a fixture of the post crisis financial system. Since 2009, China has essentially blanketed the globe with yuan liquidity lines, inking swap agreements with nearly three dozen countries with the primary goal of increasing the degree to which the renminbi is used in international trade.

If March was supposed to herald at least the beginning of the anticipated yearly rebound, April put that idea to rest. We have pushed way past last year’s “aberration” in the polar vortices and way past even the immediate aftermath of the 2012 slowdown (which hit in the also-snowy winter of 2013). You can make the argument that the full US economy is not in recession but it is now exceedingly difficult to sustain any position that doesn’t put the consumer already there.

The evidence continues to mount...

What is extremely clear is that there is something amiss with the statistical headline employment and economic data. While there are indeed pockets of improvement, which should be expected following a recessionary contraction, there is a lack of widespread recovery. That sentiment is clearly reflected in every major poll of American's over the last year. What is important is that there is a clear disconnect between the financial markets, statistical economic headlines, and the reality of the vast majority of American consumers. So, riddle me this - what happens when that disconnect is eventually resolved?

The most notable aspect of today's JOLTs data was that March layoffs in the Midwest region, aka Texas and the various other shale-heavy regions, saw terminations soar to 455K from 340K, the biggest monthly total in layoffs for the region since June 2011, and the largest monthly jump since August of 2013.

When people think about crashes, they tend to think about an event – as if some massive, grotesque, red, scaly, fire-breathing, razor-toothed catalyst should be obvious beforehand. But we know from history that that’s not the way it works...

As a diversification, art has some merit but only as a small part of an overall portfolio. For those of us who cannot afford a Picasso - as the great heritage of western art continues to be shuttered away in private Xanadus - gold remains an accessible and ideal store of value.

Today's 10Y JGB auction saw the lowest bid-to-cover ratio since Feb 2009 at just 2.24x with a notable tail of 1.1bps (the widest since March) as it appears once again, the total dissolution of liquidity from the largest bond market in the world has left the BoJ and Ministry of Finance losing control. The reaction is dramatic with 5Y through 30Y yields up 5-8bps (10Y +8bps at 47.6bps - the biggest absolute jump in yields in 2 years) leaving 30Y yields at 2-month highs above 1.49% and 10Y yields at 6-month highs.

Putting Uber's latest valuation in perspective, according to CapIq there were just 95 companies in the S&P500 with a market cap over $50 billion, suggesting Uber which did not exist when Lehman filed for bankruptcy, now has a market capitalization greater than 80% of the S&P. Specifically, at a $50 billion valuation, Uber is more "valuable" than FedEx, Marck, Deutsche Bank, General Dynamics, Nissan, Time Warner, Yahoo, Credit Suisse, Heineken and many other companies.

The next time something breaks in the financial system… it won’t be just individual banks going belly up. It will be entire countries. What’s happened in Cyprus and Greece is coming to your neighborhood… wherever you are.

For the first time since July 2008, Wholesale Sales fell for the 4th month in a row in March (-0.2% vs +0.5% expectation). On a YoY basis, this is the worst sales drop since November 2008. Perhaps even more problematic is the weakness in inventories - which will drag Q1 GDP even lower - as the last time we saw a weaker inventory growth (+0.1% in March) was May 2013. Wholesale Inventories to Sales remain at Lehman (and 2000) highs.